Mad Fientist Financial Independence and Early Retirement Tue, 27 Nov 2018 13:27:46 +0000 en-US hourly 1 The Tax Benefits of Forming an S Corporation Tue, 27 Nov 2018 08:33:27 +0000 If you have a profitable business, forming an S Corporation can potentially save you thousands of dollars every year on your taxes!

The post The Tax Benefits of Forming an S Corporation appeared first on Mad Fientist.

When I started the Mad Fientist, I didn’t do anything special to start my “business”.

As I mentioned in my last post, I was sick of being paralyzed by stuff that didn’t really matter so I just started writing and didn’t stress about the business end of things.

I kept track of my business expenses in a spreadsheet and when tax time rolled around, I just filed a Schedule C for my Sole Proprietorship and used those business expenses to reduce my W-2 taxable income.

It wasn’t until 5+ years after starting this site that I actually formed an LLC and started filing my taxes as an S Corporation.

Why did I make the change after so many years? What are the benefits that prompted me to do it?

That’s what this post is about.

My last article described why I think everyone should start a business and this post explains the benefits of forming an S Corp once your business becomes more profitable.

To assist me with this article, I brought back the tax mastermind who helped me switch my own business over to an S Corporation – my personal accountant, Steve Nelson!

Steve knocked it out of the park with his last guest post (Section 199a – The Tax Break of the Century) so I figured he’d be the perfect person to come back to talk about this complicated business tax stuff.

Welcome, Steve!

Okay, a warning. The S corporation tax strategy requires a bit of fiddling. For many small businesses, the strategy won’t make sense.

But for some self-employed folks, the S corporation option easily adds a six-figure chunk to your net worth.

Accordingly, the Mad Fientist thought it made sense to cover this tax-avoidance topic before the year ends.

The paragraphs that follow go over the accounting, discuss the costs, and then point out the steps to take if you want to do this.

Understanding S Corporation Tax Savings

To understand how an S corporation saves tax, you need to look first at the way a sole proprietor’s self-employment earnings get taxed.

Take the case where a sole proprietor earns exactly $100,000.

Assuming this person doesn’t have another job, the self-employment taxes equal 15.3% of 92.35% of the $100,000 of profits.

Self-Employment Taxes - Sole Proprietor

Percentage of Profit Subject to Self-Employment Taxes – Sole Proprietorship

That means this person pays about $14,130 in self-employment taxes.

Note: Self-employment taxes replace the Social Security and Medicare taxes that employees pay and basically work the same way.

However, suppose this person incorporates their sole proprietorship and makes an S election. In this case, the business needs to call out a chunk of the profit as wages. And in this case, that 15.3% tax (now Social Security and Medicare taxes) only applies to the wages.

If the wages number equals $40,000, for example, the employment taxes equal 15.3% of the $40,000.

Employment Taxes - S Corp

Percentage of Profit Subject to Employment Taxes – S Corp

And this means the person pays about $6,120 in employment taxes.

You see the roughly $8,000 of savings: $14,130 vs $6,120…that’s the S corporation strategy in a nutshell.

The Flip Side of the S Corporation Coin

Obviously, the S corporation tax strategy delivers substantial tax savings. Annually.
But the savings come with extra costs and risks.

For one thing, both the federal and state governments levy additional payroll taxes on the $40,000 of wages that they don’t levy on sole proprietorship profits. That’s often about $500 a year.

Further, an S corporation burdens you with additional tax accounting. You might decide to just learn the law and do this yourself. Or you might outsource the work to some accountant.

In either case, that extra accounting costs time or money or probably both (as a guess, maybe another grand for a small S corporation if you outsource the work?).

Nevertheless, an S corporation often saves substantial sums.

You’re talking low to mid six figures for many FIers but for folks who work longer, the future value “S corporation” benefit probably grows into seven figures.

The Reasonable Compensation Riddle

Lots of people use the S corporation gambit (maybe around six million folks but recent IRS data is sketchy).

But you have a big riddle to solve if you want to do this. That riddle…what wages do you pay yourself as the business owner?

To maximize your savings, you want to pay yourself as little as possible. Peanuts, ideally.

But the IRS says (and courts agree) that you need to pay something reasonable. Reasonable means what a similar employer would pay an employee for doing equivalent work.

I will tell you this..the average S corporation generates about $90,000 of profit for an owner and calls about $40,000 of this profit “wages” (this breakdown lines up pretty neatly with the earlier example).

But what you need to do is identify a reasonable compensation amount—and then document your logic.

Dirty Laundry

We’ve got a longer write-up on the setting reasonable S corporation salaries here at my blog: S Corporation Reasonable Compensation.

But we should have the “awkward talk” at this point. Regularly S corporation owners go ape when setting their salaries.

They don’t, for example, set the salary to some reasonable level. They set a salary artificially, often absurdly low.

The Treasury Inspector General in past has reported that tens of thousands of S corporation shareholders pay themselves zero salary. And in that case, they avoid paying any self-employment taxes.

Presumably, hundreds of thousands of S corporation shareholders pay more than zero but still unreasonably low salaries.

But you don’t want to do that. You really don’t.

If you set your salary too low, the IRS can reclassify distributions paid to shareholders as wages and then slap you with penalties.

And here’s the other thing to keep in mind. You don’t have to go crazy or break the rules.

How Optics Matter to Reasonable Compensation

Consider again the earlier example where someone makes $100,000 but pays $40,000, or 40%, in wages.

Okay, maybe that works for some taxpayers. And it meshes with the averages pretty well. But that breakdown may be unreasonable.

Yes, many taxpayers get away with this. The IRS audits about 12,000 S corporations a year, and nearly 6,000,000 S corporations exist.

If you’re paying the average, you are pretty boring to the IRS’s computers.

However, what you really ought to do in a situation like this?

Dress up the optics of the tax return. And people use two tricks here…

Trick One: Nontaxable Fringe Benefits

Trick one? Add nontaxable fringe benefits like health insurance and employer pension contributions.

For example, say you were running a small S corporation that makes $100,000 and that you want to set $40,000 as your S corporation reasonable wage. That leaves $60,000 you pay out as a distribution to your owner—and on which you pay no employment taxes.

That might be risky…

But say the S corporation provides $20,000 of health insurance and a companion health savings account.

In this case, that $20,000 counts as wages (and so bumps the shareholder wages from $40,000 to $60,000) but the extra $20,000 of wages doesn’t increase the employment taxes.

Say you also run either a SEP-IRA or a solo 401(k) plan that provides a 25% employer match. The 25% employer match applies to the $60,000 of wages, which means another $15,000 of nontaxable fringe benefits.

With these fringe benefits, the $40,000 “base” grows to $75,000 of total compensation—though note again only the $40,000 of base wages get subjected to payroll taxes.

If a business makes $100,000 and pays out $75,000 as compensation and benefits, that still leaves another $25,000. And maybe a little risk exists there…

But here’s where a second trick comes into play.

Trick Two: Dial Down the Distributions

That second trick? If you can, you dial down the distributions to the shareholder. Why does this work?

As noted earlier, an IRS agent can only reclassify as wages those distributions the S corporation pays out (remember in our example that’s the last $25,000 a year).

So, if you leave some of that money (say $2,000 or $5,000) inside the S corporation (as your rainy-day fund or as part of your taxable portfolio), bingo…that money can’t be reclassified as wages.

Another example? If you’re someone who gives to charity (say $1,000 or $2,000 or whatever), you can use some of that $25,000 for your charitable giving. And then that money can’t be reclassified as wages.

Note: When you make charitable contributions from an S corporation, the charitable contribution still ends up on the 1040 return.

To put all this together, a sole proprietorship making $100,000 a year might be able to pay a $40,000 wage, save nearly $8,000 a year in payroll costs, and then remove the risk of an audit by legitimately sculpting the tax return to bump compensation and fringe benefits and dial down the distributions.

Further, this sculpting might be especially compatible with working toward FIRE through aggressive saving and investing.

How Would You Even Do Something Like This?

Okay if you operate an unincorporated small business, this all sounds pretty interesting, right?

Sure, some extra work but not that hard to deal with.

So, what’s the next step? Well, if you did want to do something like this, what you would probably do is immediately form a limited liability company.

A limited liability company (LLC) is one of the legal entities that can make an election to use the S corporation tax accounting rules.

The Mad Fientist, on your behalf, arranged for our offices to supply complimentary copies of our DIY S Corporation formation e-book. It provides step-by-step and state-specific instructions for setting up an LLC, getting the LLC an EIN, and then making an S corporation election for the LLC. The DIY kit also includes sample LLC operating agreements. And by the way? Normally, we sell these for about $40. Mad Fientist did you a solid on this! Grab a complimentary kit from this page, Downloadable S Corporation kits… All you need to do to “buy” a kit for some state for free is enter the promo code MADFIENTIST.

Mad Fientist Note: I used one of these kits to set up my Florida LLC and S Corp and it made the whole process super simple. I just followed the guide, line by line, and got everything set up really easily. Thanks to Steve for making these free for Mad Fientist readers and be sure to get your state’s kit before the end of the year because the code will expire on 12/31/2018!

An important point: You need to form the LLC before the new year starts and then file the S corporation election paperwork after setting up your LLC but before March 15th of the year for which you want to use the S corporation gambit.

Example: You might form an LLC today—this very morning or afternoon, for example. But you would file the S election paperwork so it sets 1/1/2019 as the effective date (for 2018, the LLC gets ignored and so your business is treated as a sole proprietorship).

The one other rule to consider: Once you operate your business as an S corporation, you must pay yourself a reasonable salary. And you need to have paid that reasonable salary before the calendar year ends.

Example: If you form an LLC in late 2018 and elect Subchapter S status for 2019, you need to have paid yourself reasonable wages by December 31, 2019. That means paychecks, quarterly federal and state payroll tax returns, tax deposits, etc.

Three Cautions to Wrap this Up

Let me issue three cautions before I wrap this up.

First, carefully think through the reasonable compensation math. The S corporation gambit only works well if you can pay yourself a wage that allows you to really save on your self-employment tax bill. Possibly if you’re a one-person independent contractor, you will need to finesse the optics with fringe benefits to get the S corporation to really work safely.

Tip: Usually S corporations don’t work well for side hustles if you have another W-2 job. And usually they don’t work well for businesses unless you’re making high five-figure profits or more.

Second, you should know that two states—Tennessee and California—make the economics of an S corporation option tricky. California levies a 1.5% franchise tax on the S corporation’s profit (the franchise tax also is always at least $800). And Tennessee doesn’t let you use the S corporation accounting for state tax purposes. For these states, you need to double-check your math. The state tax laws may mean the S corporation isn’t viable.

Third, an S corporation’s reduced wages reduce your future Social Security benefits. Now, that effect is usually modest if you pay yourself a reasonable wage. But to really come out ahead on this, you want to save your payroll tax savings.

It’s the Mad Fientist again. Thanks for the post, Steve!

There’s another benefit of having an S Corp that’s worth mentioning…

If your business makes a lot of money (i.e. more than $157,500 for a single person or $315,000 for a married couple filing jointly), having an S Corp could help you qualify for the tax break of the century when you may not have otherwise.

Imagine you’re a single person and your business earns a $250,000 profit next year.

If your business is structured as a sole proprietorship, you wouldn’t receive any Section 199a deduction because you earn too much to qualify.

If you instead have an S-Corp, you’d be eligible to receive a Section 199a deduction on 50% of the W-2 wages paid by your business.

So if you paid yourself 28.5714% of your business profits (which is the percentage that would maximize the Section 199a deductions in this case), you’d be able to get a 20% deduction on $71,428.50 of your income.

This benefit alone could save you thousands of dollars! Throw in the savings on employment taxes described in the post and you can see why this is a great move for many profitable businesses.

If you already have a business, hopefully this post helps you save a big chunk of money on your 2019 taxes (remember, set up an LLC now if you want to make an S-Corporation election for the entire 2019 tax year).

And if you’re just starting your business, hopefully this article gives you an idea of some of the other tax benefits you can look forward to when your business grows!

Related Post

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Why Everyone Should Have Their Own Business (and How to Guarantee Success) Fri, 16 Nov 2018 10:00:27 +0000 If you focus on the right things and start your business in the correct way, you're guaranteed to improve you life both before and after early retirement!

The post Why Everyone Should Have Their Own Business (and How to Guarantee Success) appeared first on Mad Fientist.

It was my 30th birthday and I was having a meltdown.

Even though I was surrounded by friends at a beautiful ski resort in Vermont, turning 30 hit me hard and I was bringing the whole party down with my self pity.

“I’ve done nothing with my life!”

“I haven’t accomplished anything I thought I’d accomplish and now I’m old!”

My girlfriend (now wife) took those statements personally and got offended, which made the atmosphere even worse.

It was embarrassing and my friends still make fun of me about it today (as they should).

Birthday Ski Trip

Birthday fun before the meltdown

The reason I was so upset was because I had all these good ideas in my 20s but I created absolutely nothing.

The Wrong Way to Do It

It’s not because I didn’t try though. Here’s how it went in my 20s…

I would have an idea that I’d get really excited about.

I’d start doing a lot of research, I’d maybe register a new domain, and I’d start planning how everything would go. And when I say everything, I mean everything.

I’d worry about things that hadn’t even happened yet (and were very unlikely to happen) and before long, I’d be overwhelmed and I’d put that idea on the shelf with all the rest of my good ideas.

Luckily, a new exciting idea would take its place and I’d start the cycle all over again.

That cycle made me feel like I was doing something but I realized on that cold night in Vermont, it all actually amounted to nothing.

Just Start

Thankfully, this story has a happy ending.

The Mad Fientist only exists because of that night.

I turned 30 in January of 2012 and I launched the Mad Fientist in February.

I had no idea what I was doing but I launched anyway. I didn’t know exactly what I was going to write about but I launched anyway.

I had never interviewed anyone before but I started a podcast anyway. I didn’t even have a microphone so I had to borrow a crappy headset (like the ones telemarketers wear) from a colleague.

Podcast Equipment

All the podcasting equipment I had for my first 10+ episodes

I didn’t feel ready but I started anyway and it made all the difference.

Important Lesson #1: Start now and figure out the details later.

Good Ideas Come from Action

When I started the Mad Fientist, I thought I would write about investing. I planned to do a bunch of research, develop innovative investing strategies, and write all about them.

Once I started researching, however, I realized that index investing has the highest likelihood of success (with the lowest costs) so that screwed up my plan to come up with interesting and unique investing methods!

Since I still wanted something interesting to write about and wanted to speed up my journey to FI, I was forced to start looking into other ways to optimize.

And that’s how I ended up writing about tax-avoidance strategies for early retirees, which is what ended up making my site popular.

Had I waited for a eureka moment before starting, it would have never come. It was only the process of researching and writing about other things that lead me to an interesting topic that nobody had written about before.

Important Lesson #2: Your best ideas will come from the work you do (not from magical bathtub inspiration). It’s much easier to improve on existing ideas and make subtle shifts in direction than come up with the perfect idea out of thin air.

Why Everyone Should Have a Business

These are important lessons but why should you care? Maybe you don’t have a business and haven’t thought of starting one?

I’m here to say that starting a business could be the best thing you do on your path to financial independence and it could be the thing that impacts your happiness most after early retirement.

Here’s why…

Fills the Void

People who achieve financial independence and retire early are usually motivated, ambitious, hard-working people.

They’re like a car going 75 miles per hour down the freeway but when they find out about FI, they speed up to 100 mph to get to their FI destination as soon as possible.

What happens when a car going 100 miles per hour immediately drops down to 0 mph though?

You don’t have to be a physicist to know that it’s not good.

And yet that’s what I often see when talking to people about pursuing FI.

They are consumed by their goal, they’re racing there at 100mph, and yet they’re not thinking about what happens when they get there (or what they’re going to do after).

I did exactly the same thing. And as I described in this post, the only thing that kept me from freaking out after leaving my job was the fact that I had an existing business to fill the void.

What About Hobbies

You may be thinking to yourself, “Whatever, Mad Fientist…I have a lot of hobbies and there’s tons of stuff I plan to do after I retire!”

Hobbies are good, of course. But a business is different because it provides additional pressure that makes you do what you say you’re going to do.

For example, I thought I would cook a lot of interesting meals after leaving my job. I have all day to buy fresh ingredients and research new recipes so why wouldn’t I start my new cooking hobby like I’ve always wanted to?

Well, it’s been over two years since I left my job and I still haven’t done it.


Because the only external motivation to do it is my wife saying, “What happened to your plan to cook me delicious meals all the time?!” Yes, that’s motivating but it usually just results in me cooking something easy that I already know how to cook.

The Mad Fientist (my business), however, is different.

I still publish at roughly the same frequency as I always have and that’s because it’s a real business and if I don’t publish for a while, I get a bunch of emails asking when the next one is going to come out.

So a business can be just like a hobby but one that you take more seriously (and therefore hopefully get more fulfillment from).

Which brings us to the most important part of starting a business and the part that if you get it right, can guarantee your success…

How to Pick the Right Business

The first step to picking the right business is to completely remove money from the equation.


If you’re on the path to FI, you already make enough money. And if you’re FI, you already have enough money.

The primary purpose of this business is not earning money (although it likely will)…it’s for increasing your happiness.

Side Note: If you remove money from the business equation, it will put you in a different league from everyone else and can drastically improve your odds of success.

For example, if the Mad Fientist business was about maximizing profit, do you think I would have removed ads from my website? Would I choose to keep my podcast commercial-free? Hell no!

But I do do those things and I believe it’s allowed me to build a closer, more trusting relationship with my readers/listeners and that’s helped me grow to where I am today.

Not focusing on money will give you a unique advantage over other businesses in your space and will help you stand out.

So if you don’t focus on the money, what should you focus on instead?

What to Think About When Choosing a Business to Start

What to Think About When Choosing a Business to Start

  • Interest – What are you most interested in or excited about?
  • Improve – What do you want to learn more about or get better at?
  • Meet – Who do you want to meet and hang out with?
  • Utilize – What skills do you like utilizing and want to improve on?

Let’s use the Mad Fientist as an example again.

Back in 2012, I was aggressively pursuing FI and was ridiculously excited about it so box #1 was ticked.

In order to get to FI quicker, I wanted to learn more about investing and I wanted to figure out new ways to optimize my finances so box #2 was ticked.

I also wanted to be able to talk to people who had already achieved FI so that I could ask them questions. Box #3 was ticked.

As far as my existing skills were concerned, I was better at math and money stuff than most people, I was a professional software developer so I had web development skills, and I also had above-average Excel skills.

Was I a great writer? No. Had I ever interviewed anyone before? No.

That didn’t matter though because in those early days, I just focused on what I was good at and used that to differentiate myself.

For example, I immediately released a FI Spreadsheet that I had built to track my own numbers. I also created a custom calculator to supplement the first post I wrote. I then started using my math and analytical skills to come up with optimization strategies specifically for early retirees.

I used skills I had (e.g. web development, math, etc.) to compensate for skills I didn’t feel I had yet (e.g. writing, interviewing, etc.).

I didn’t need to be the best at everything but I figured there was enough that I was “above average” at that would allow me to potentially make a meaningful contribution. The other stuff I just learned and got better at along the way.

Guaranteed Success

Even if I never received a single reader or made a single dollar, the business would have still been a great success.


First, it forced me to learn more about something I was already very interested in. The things I learned while researching blog posts and podcast episodes drastically reduced my time to FI and allowed me to optimize my own finances more than I would have otherwise (after all, the best way to learn something is to try to teach it to others).

It also allowed me to expand my web development skills, design skills, writing skills, and people skills…all things I wanted to improve on.

Having a podcast gave me the opportunity to call people who did exactly what I wanted to do (i.e. achieve FI) and ask them all the questions I wanted to. I got to meet interesting people that I wouldn’t have otherwise and I learned a lot from them along the way.

So even if the business didn’t make a single penny, it would have been incredibly successful because the business fell into the neon-green diamond at the center of the Venn diagram shown above.

There are even more side benefits to having an actual business that are worth mentioning…

Business Credit Cards

Having a business opens up an entirely new category of travel credit cards you can apply for!

As I’ve mentioned before, travel miles/points have allowed me and my wife to visit 50+ countries for very little money and credit cards are a big reason we’ve been able to accumulate so many points.

Business cards offer some of the best signup bonuses on the market but you need to have a business to take advantage of them.

To see what I mean, here are the two best personal cards currently available today:

Card Bonus Spend Requirement Annual Fee
Chase Sapphire Preferred® 50,000 points $4,000 in 3 months $95 ($0 for first year)
Chase Sapphire Reserve® 50,000 points $4,000 in 3 months $450

Now compare those with the two best business cards:

Card Bonus Spend Requirement Annual Fee
Ink Business Preferred℠ 80,000 points $5,000 in 3 months $95
Ink Business Unlimited℠ 50,000 points $3,000 in 3 months $0

Business cards often provide higher signup bonuses for lower annual fees and the great thing is, you can get them in addition to personal cards! So when you have a business, you can get the best of both worlds.

Bonus: If you are a resident of the US and want to utilize the strategy I used to earn hundreds of thousands of miles for free, sign up to the Travel Card segment of my email list by entering your email address below:

Tax Benefits of Owning a Business

Owning a business also provides numerous tax benefits so let’s dive into some of those…

Business Losses

My first year running the Mad Fientist, I made no money but I spent money on business things like website hosting so my business made a loss for the year.

I was able to use that business loss to lower the amount of taxes I paid on my normal W-2 salary!

Hopefully you don’t make a loss for many years but at least it helps you lower your taxes in the years that you do.

Business Expenses

Business expenses are a great way to pay for things you’d probably buy anyway while using tax-free money to do it!

This beautiful MacBook Pro I’m typing this article on was a business expenses (you definitely need a laptop to be a blogger).

My recent flight from Scotland to Florida to attend a conference was a business expense (the fact that my family lives 1.5 hours away and I got to see them on the trip was a nice bonus).

My cell phone and internet plans are business expenses (need a way to stay in contact with my audience, right?)

The list goes on but you can see that having legitimate business expenses for things you’d probably spend money on anyway is a great way to lower your taxes.

Retirement Accounts

When you have a business, you can contribute to tax-advantaged accounts like SEP IRAs, SIMPLE IRAs, or Solo 401(k)s.

Depending on how much profit your business earns, you could potentially sock away $55,000 into one of these great accounts and drastically lower your tax bill!

Other Tax Benefits

Having a business will also allow you to take advantage of the Tax Break of the Century!

As you can see, the tax code is very kind to businesses but you need to have a business to take advantage of all the great stuff on offer.

What About the Money

As I mentioned, money shouldn’t be the primary focus for your new business.

Mad Fientist success and all the great things that have come from that over the years wouldn’t have happened if I had focused on the money.

Yes, you have to be “trying” to earn money (otherwise the IRS will classify your business as a hobby and you’ll miss out on all the great tax breaks) but it shouldn’t be the primary thing that’s driving you.

Here is the traffic and income graph of the Mad Fientist since it started in early 2012.

Mad Fientist Income/Traffic 2012-2017

Mad Fientist Income/Traffic 2012-2017

As you can see, it took over four years to receive any sort of meaningful income.

That’s four years of putting in full-time hours and receiving pennies per day.

That’s why so many blogs and podcasts fail. You have to love the topic to keep going and if you’re focused only on the money, you’ll quit long before you see any.

Passive Income

This is a good time to talk about “passive income”.

Passive income is a lie and it should instead be called “front-loaded work”.

Front-loaded work is great because it potentially has unlimited upside and you’re not simply trading hours for dollars. It’s definitely not passive though because it’s often harder than normal work and there’s a lot of risk you won’t earn anything from your effort.

I would say that front-loaded work is the perfect type of work for people who are financially independent and don’t need the money though.

Potential Energy

So if you’re not actively pursuing money in your business, what can you pursue instead that will allow you to still feel productive?

Answer: potential energy

In the early years of the Mad Fientist, I would get jealous that other smaller sites were earning a bunch of money and I wasn’t earning anything.

It was very tempting to do some of the things those other sites were doing (especially since I was still saving for FI at the time) but I wasn’t comfortable doing any of it because none of the money-making opportunities felt right to me. In fact, it wasn’t until many years later that something finally came along that I was excited to promote (i.e. the free portfolio-management software that I use).

I still wanted to capitalize on the traffic I was getting at the time though so I decided to build up my potential energy instead.

What do I mean by that?

Think back to your high-school physics class. When you push a ball up a hill, you’re increasing the ball’s potential energy. The higher you go, the more potential energy. When you finally decide to convert the ball’s potential energy into kinetic energy and you push the ball back down the hill, the higher the ball is on the hill, the faster and further it will go.

I applied that same idea to my business.

Since there were no good money-making opportunities available (kinetic energy), I focused instead on just building up my email list (potential energy).

I figured that if I decided to write a book or something one day, it’d be great to have a lot of people to email about it (side note: I think writing a book would kill me so I’ve since realized that that’s never going to happen).

So I focused on building up my potential energy (email list) in order to generate more kinetic energy (profit) one day when I eventually found something I’d be comfortable selling or promoting.

This allowed me to still feel like I was doing something productive without compromising my integrity or pissing off my audience.

Other Lessons from Mad Fientist Success

There’ve been many other business lessons I’ve learned from this Mad Fientist experiment that are worth sharing…

Be You

When I was thinking of names for my site, I shared the Mad Fientist name with Jill and some of my family members.

They all hated it.

They thought it was dumb and since fientist is a word I made up myself, they thought that nobody would understand what my site was about.

I decided to go with it anyway because I thought it perfectly captured the dorky, analytical, math-focused direction I wanted the site to go in.

Turns out, that decision is one of the main reasons the site is still around today.

Mr. Money Mustache was my very first podcast guest way back in 2012 and since I had no audience at the time, I had no idea why he agreed to be on my show.

It wasn’t until many years later, after we became friends in real life, that I finally asked him why he agreed to come on my podcast.

His answer…”Because you’re the Mad Fientist!”

So he liked my name/logo and that’s why he agreed to come on the show.

Not only did his appearance give me my first traffic, it also made me take my site more seriously. There were many times in the first few years that I thought about quitting but each time I did, I’d say to myself, “No, MMM took a chance on my podcast so I need to keep going and hopefully send some traffic his way one day to pay him back”.

Being me and picking a dorky site name is probably the main reason I’m still typing to you today.

You Don’t Have to Do What Everyone Else is Doing

The other thing I learned is that you don’t have to do what people tell you you need to do or what you see others doing.

When I started, everyone said you had to post weekly or else you’d never succeed. You need to be consistent!

I always knew that if I tried to follow a strict schedule, I’d end up burning out and would quit so I just focused on quality instead of quantity.

I figured that if I provided quality stuff, people would subscribe and as long as I kept producing quality stuff, people wouldn’t unsubscribe so I would grow. I personally would never unsubscribe from an email list because someone only emailed me interesting stuff once a month but I would unsubscribe if they emailed me mediocre stuff weekly.

Yes, it took longer to grow but when growth/profit isn’t your primary focus, it doesn’t really matter (and if you’re FI or going to be soon, it definitely doesn’t matter).

Important Lesson #3: If you get more new readers/customers than you lose, you’re guaranteed to be successful eventually.


Creating a business has provided more benefits than I can count and is one of the main reasons my post-job life has been so enjoyable.

In fact, I’ve been thinking about that Venn diagram a lot and am considering starting a new business in a completely different field (not because I want to make more money but because I want all those other benefits I talked about).

New Business Idea

Let’s revisit the Venn diagram but for this new business idea.

  • Interest – The thing I’m most excited about and interested in these days is synthesizers. I read about them all the time and I love making weird sounds on the ones I already have.
  • Improve – I want to get better at programming synthesizers but I’m not working as hard as I’d like to on that goal so I clearly need some external motivation.
  • Meet – I want to meet other musicians and play music with other people.
  • Utilize – I have above-average knowledge of sound synthesis and I have a lot of experience building a web-based business and an online audience.

So let’s look at my current situation…

I’m interested in synthesizers and I want to do more with them and meet others who play them so I can either:

  1. Continue reading about synthesis online, continue playing around with my keyboards in my apartment, attempt to find a local musicians meetup group or something.
  2. Start a new synthesizer-focused website, create a comprehensive synthesizer video course that I can give away for free on YouTube, create advanced-level premium content that I can later sell to my audience, etc.

If I go with option #1, I imagine I’ll get better (slowly) and may meet some cool people along the way but think about all the possibilities of option #2…

I would be forced to dive into the nitty gritty details of synthesizers while building my comprehensive course. I would find out what is truly important and would drastically improve my own skills while trying to teach others.

After creating the website and course, I would likely have people getting in touch with me who are interested in the same type of music that I am (for an introvert, having people contact you is WAY easier than trying to reach out to others).

If one of my favorites bands is looking for a new keyboard player, I would have instant credibility and there’d be a much higher probability of getting an audition (they’re all small bands so this is actually a possibility).

If my audience got big enough, I’d potentially get free synths and gear sent to me. And any synths that I bought myself, I could write them off as a business expense!

So even if the business itself doesn’t earn much money, I will have still won.

I will have learned more than I would have otherwise, I will get to meet more people than I would have without the business, and I will have at least saved some money on things I would have bought anyway.

Best case scenario though, I have an online course that sells while I sleep, I have a higher likelihood of joining one of my favorite bands, and I have a room full of free synths that I can play for the rest of my life.

See why I think creating a business is something everyone pursuing FI needs to do?

So get out there and create something.

If you start your business the right way, it shouldn’t even cost you much money.

For example, this site gets millions of pageviews every year and yet I’m still only paying $15/month for my web server (a Dreamhost VPS), $5/month to host my podcast (Libsyn), and $23/month to host my custom web applications (Heroku).

My biggest cost is for my email software (ConvertKit) but even that was free when I had less than 2,000 subscribers (on Mailchimp).

It’s easier and cheaper than ever to start your own business so there’s really no excuse not to.

At best, it will provide extra income that will drastically reduce your time to FI and will make your transition to joblessness easier.

At worst, it will allow you to improve your skills, meet interesting people, and increase your happiness and fulfillment both before FI and beyond.

Don’t wait until you have a pathetic meltdown in front of your friends…start something now!

Related Post

The post Why Everyone Should Have Their Own Business (and How to Guarantee Success) appeared first on Mad Fientist.

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James Clear – Atomic Habits and Building a New Identity After Retirement Tue, 16 Oct 2018 16:32:44 +0000 James Clear joins me on the Financial Independence Podcast to talk about productivity, deliberate practice, fasting, and his new book - Atomic Habits!

The post James Clear – Atomic Habits and Building a New Identity After Retirement appeared first on Mad Fientist.

A challenging aspect of early retirement is the loss of identity you may experience when leaving a career you’ve spent a big chunk of your life building.

However, one of the most exciting parts of early retirement is that you have the time, money, and freedom to create a completely new identity!

How do you do it though?

Today, I had the privilege to speak to the writer who has been most helpful to me as I’ve started building my own new identity – James Clear.

In this episode, we discuss habits, deliberate practice, and how to best create a meaningful and purpose-driven life!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • What makes life meaningful and how to live better
  • The importance of social connections
  • How to deal with the “pain of discipline”
  • The physics of productivity and why habits are so powerful
  • The importance of having an easy on-ramp to a task
  • Why a habit must be established before it can be improved
  • How to find a keystone habit that can improve multiple areas of your life
  • Why you should optimize for the starting line rather than the finish line
  • The downsides of habits
  • What is deliberate practice and why it’s important
  • How habits can change your identity
  • Why rewards are good (but only if they don’t conflict with your new identity)
  • What is intermittent fasting and why it’s beneficial

Show Links

Full Transcript

Mad Fientist: Hey! What’s up everyone? Welcome to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest to find out how they achieved financial independence.

Today’s episode’s a real treat for me because I’m getting to interview somebody that I’m a big fan of. And I actually don’t know him personally. But a few weeks ago, I got an email from him, and I just assumed it was a normal newsletter email because I’m subscribed to his email list, but instead it was a personal email to me asking if I wanted a copy of his new book.

And since I’m a huge fan, I of course said yes. And I also asked if he wanted to be interviewed for the show. And luckily, he agreed. So I’m really excited to chat with him for the first time.

My guest is James Clear. And if you’re one of the other 400,000+ subscribers on his email list, you know that he’s one of the best writers when it comes to motivation and habits and personal productivity and health and well-being and lots of different topics that are actually all the topics that I am really needing to read about these days. Now that I’ve left my job, I don’t have any sort of external motivation to do things, but there are lots of goals and long-term projects that I want to make progress on. And his writing has been really instrumental in helping me make progress on those and do it in a way that’s not difficult and is actually enjoyable.

So, I can’t wait to talk to him about a lot of things. And also, I can’t wait to dive into his new book, Atomic Habit.

So, without further delay, James, thank you so much for being here. I really appreciate it.

James Clear: Oh, you bet! Thank you for having me.

Mad Fientist: And before we start out, I have to really thank you because I’ve been doing this for over six years. I’ve had some of the top finance minds on the show. And this is actually the first time my wife has thought I was super cool when I told her about you being on the show. So she doesn’t care about money at all, so she doesn’t know all the big finance names. But when I said you’re coming on, she was so pumped about it. So, thanks for making me look cool in her eyes.

James Clear: Nice! Yeah, that’s great. Well, thank you to her. And I’m excited to be here. Thanks so much.

Mad Fientist: No, no. And actually, a lot of thanks does go to her because over the last two years since I left my job, she has forwarded me about 10 of your emails because they’ve been exactly what I needed to read at the time that I needed to read them. And I’ve eventually obviously subscribed to your email list after the fact. But yeah, lots of great content that we’re going to dive into.

But before we get into the specifics, I noticed on your about page that you say the central question that you’re trying to answer with your work is “How can we live better?” And the fact that you focus on these things like habits and motivation and making progress on things, I’m wondering, does that mean that you think that tackling big projects and doing work that you’re proud of and making progress on important things that you are passionate about, is that what leads to a happy and good life?

James Clear: Yeah, that’s a tough question. I think everyone wants to do work that matters. Everybody wants to feel respected to some degree. And I feel that too. I want my work to feel like it’s making a difference and to hear stories like the one you just told, that makes me feel great, that you’re finding the writing useful and it’s been valuable to you at different points in your life and so on.

I’m not sure. I don’t know what the answer to like what makes life meaningful or what makes life worthwhile or feel purposeful. I can say, for me, at the times when I have felt that the strongest have had some form of social connection—either being part of a team or being a leader on a team where everyone is working toward a common goal, or in the case of my writing, sharing articles each week and then getting the feedback from the audience.

I actually didn’t realize that until I wrote a book. But writing my articles each week, I get feedback immediately. I’ll email everybody and I get all these emails back about what people liked or what they didn’t like. And I really thrive on that feedback, that social interaction. And with the book, it was hard for me because I didn’t get that as much. So that kind of clarified that social connection was an important part of that process for me.

So, I can’t say what it is for everybody. But I can say that having that type of connection, or for me, what makes the work matter is that other people are finding it easily.

Mad Fientist: Yeah, that’s a good insight. Since I left my job—I’m not sure how familiar you are with financial independence or the retirement community, but the main focus seems to be like, okay, people just want to get away from their jobs and save up enough money so that they never have to work again. And it’s usually getting away from something that’s bad, and not so much getting towards something that’s good.

So, for me, when I hit that goal two years ago, I was then just dropped into this place where it’s like, “Okay, now I’m really finding what’s important to me and I’m trying to make progress on that.” And that’s where your work has been super beneficial. But it’s a struggle because I don’t know if you’ve heard this quote before, but I just came across it recently, and it’s: “We must all suffer one of two things—the pain of discipline or the pain of regret.” And I realized that the dissatisfaction with my job wasn’t because I had a bad job. That wasn’t the case. It was the pain of regret that I felt like I wasn’t doing what I was actually meant to do and what I really wanted to do.

But when I had all the freedom in the world after leaving my job, that pain of regret was then substituted with the pain of discipline. And that’s where you come in. And that’s just equally as difficult.

You just wrote this fabulous book about habits. So my question to you is: “Do you think habits is the answer to the pain of discipline?” Is that something that could drastically reduce that pain of discipline?

James Clear: Well, it’s certainly one thing that can help a lot. So to answer your previous point, yeah, I’m very familiar with the FIER and the whole community. I’m kind of obsessed with it really. I love the methodology and the thinking behind it. I’ll read the FIER threads and all that type of stuff. I know Pete, Mr. Money Mustache and we’ve talked a couple of times.

Anyway, I appreciate a lot behind the philosophy and the thinking. With reference to discipline and habits, habits are—

I guess I should step back for a second and just talk about habits from a high level.

So, as you go through life, you face problems. And many of those problems are small; some of them are large. For example, your shoe could be untied. Needing to tie your shoe is a problem. It’s a small problem, but it’s something that you need to figure out.

So, you tie your shoes. And as you do it a hundred or two hundred or three hundred times, pretty soon, you learn how to do it on autopilot. You can have a conversation while you’re tying your shoes or think about something else.

And this is sort of the purpose of habits and why your brain forms habits, is that it allows you to solve problems that you face on a recurring or repeated basis in an automatic fashion so that you can free up your mind to focus on other things. You can direct your attention toward other areas.

In the case of discipline, habits make it easier to get into the work. And I think that is actually the key step to focus on. They don’t necessarily make hard tasks easy or painless. But they can make it less painful to get into the work.

And so, sometimes I like to think about habits like an entrance ramp to a highway. You slide on to this entrance ramp. You don’t have to be moving that fast. It’s not that difficult. You don’t have to think about it. And before you know it, you’re speeding 60 miles an hour down the other direction.

And a well-placed habit can sort of act like that in your life. It allows you to automated the beginning of a routine. And by automating the beginning and making it a ritual, you make it more automatic and easier to get into the work.

And once you’re there, well then you probably have to still focus and exert some effort to get the work done or to finish writing that chapter or whatever it is that you’re working on. But if you can make it as painless as possible to start, then it becomes easier to start each day.

And in many ways, habits are just an exercise in starting each day. If you can get started each time, then it is a habit.

Mad Fientist: Yeah, that’s been key for helping me. One of your articles talks about the physics of productivity. And that was huge for me. And it’s talking about having a nice, easy pre-game to get into that habit. And then that launches into letting you get to the work.

One of the big projects that I’ve only started working on after leaving my software career is just writing music. That’s always been a dream of mine, to write an album. It doesn’t matter if anybody buys it, just to have an album that I’ve written and that I’m proud of. But that’s so daunting especially for a math and science guy like me. How do you just pull a song out of thin air?

So, when I read your physics of productivity, I now have this really easy entrance ramp. And that’s just actively listening to one song that I like every day. And so I sit there with headphones on that are like my monitoring headphones that are really sensitive so I can hear all the different aspects of it. I’d listen to this song three times just picking up production techniques and trying to just really understand how it was put together.

And by the end of it, I already have my headphones in, so I can just plug in and start actually writing music. I’ve already been amped about it because I’m like, “Wow! This song was great. I would like to make a song this good myself.” And I usually pick out some sort of production thing that happened in the song, and I’m like, “Ooh, I should try that on the song I’m working on.”

So, it’s like this perfect, easy thing that I can get started because it’s not intimidating. It’s like you’re here, you have to listen to music, it’s just like, “Ooh, I love doing that,” so it’s not painful and it’s not intimidating, but then it launches me right into this really hard task.

Thanks a lot for that Physics of Productivity post. Is that probably one of the core aspects of starting a new habit, do you think, trying to find that easy on ramp to get that habit a daily practice?

James Clear: Yeah. So that’s a great example. What you just gave is a great example of what I call a motivation ritual in the book. A motivation ritual is just what you had described. It’s something that you do that’s very simple at the beginning that kind of gets you excited to do the work or at least gets you in the right mindset.

I played baseball for many years. And when I was playing in college, I would follow the same ritual at the beginning of each game. And one of the things that’s somewhat challenging about baseball as a sport is that there are so many games compared to other sports. You just are playing constantly.

And so coaches are always saying things like, “Alright, we’ve got to find a way to be motivated today. We’ve got to find a way to be up and be ready to play” and so on. And there are going to be some days where you show up, and you just don’t feel like you’re into it.

And so, for me, that ritual, just the same number of stretches and running and then the same kind of warm-up, the number of throws and so on, by the time that I finish that, I was like, “Alright!” It was like a switch had been flipped. And my brain was like, “Okay, it’s time to be in game mode.”

And so, in many ways, rituals like that can act that way.

You asked, “Is that the right way to start a habit?” and so on. What I usually recommend to people is what I call the 2-minute rule. T he basic idea is many of the habits that we want to follow cannot be completed in two minutes. But pretty much any habit can be started in less than two minutes. So, for example, go for a run becomes “put on my running shoes and step out the door” or do 30 minutes of yoga becomes “take out my yoga mat” or read one book every week becomes “read one page.”

I have a friend, a poet, who his habit each day is to write one sentence. Now, sometimes, he writes a whole poem or multiple pages. But every day, he just tries to write one sentence.

And sometimes people think this sounds a little bit like a trick, like “I know the real goal is to go for a run, like I’m not actually just trying to put my running shoes on and get out the door each day. But what people fail to realize, especially in the beginning is that a habit must be established before it can be improved. So you don’t even have the chance to optimize something if you don’t master the art of showing up every day.

And there are all these little logistical details associated with building a new habit that nobody really thinks about. Whenever we think about a new habit or some kind of goal that we want to accomplish, we always focus on the outcome. We’re always trying to optimize for the finish line. We think about, in your example, the great song that you want to produce, or we think about making six figures next year, or losing 40 lbs. in the next six months. It’s always focused on the end goal, the finish line.

But instead I think we should optimize for the starting line, not the finish line. And by doing that, by scaling it down to the first two minutes and making it as easy as possible, you start to figure out a lot of these logistical details that you don’t think about beforehand.

Say for example I had a reader who ended up losing over a hundred pounds. And one of the ways that he did it was that he went to the gym, but he didn’t allow himself to stay for longer than five minutes. So he would go, he’d show up. He’d do an exercise or something. And then, once it hit five minutes, he would leave. And he did this for like the first six weeks.

And it sounds like he’s not really doing anything. But what you fail to realize is that there are all these questions you have to answer when you’re starting a new habit like “Okay, I’m going to go to the gym. What gym will I go to? How will I get there? What road will I take? What path will I follow? Am I going to meet a friend there? Am I going by myself? What time of day am I going to go? Do I need to get my gym bag ready before I go to work? Or can I get my gym clothes afterward?”

All of those little things that you don’t think about because you’re just thinking about the outcome that you want, they kind of become these points of friction. And if you make it as easy as possible, and you just focus on the first two minutes—or in his case, the first five minutes—then you can get all that stuff figured out.

And then, by the time he turned around six weeks later, and he was like, “Well, I’m coming here all the time. I got to feel like I’m doing something more…”

And that’s like the complete opposite of how most people build a habit. Most people are like, “Alright! Let me do Insanity or P90X or join a crossfit gym or do something really intense because I’m all motivated and I want to get in shape,” and then it starts to feel like a hassle. The workout was a hassle. Ferreting out all those logistics is a hassle. And suddenly, there’s too much friction. They burn out after a week or two.

And so, my recommendation is to scale it down to the first two minutes. Get the habit established and master the art of showing up. And then, you have the chance to optimize and improve from there.

But if you don’t show up each day, then you don’t have the option to get better anyway.

Mad Fientist: Yeah, I know. That’s great advice. And that’s definitely something I found as well when I was trying to do an hour a day at least. There’d be days where I knew I wouldn’t hit that hour, so I would just not do anything, or I just wouldn’t feel up to doing an hour so I wouldn’t do anything. But when I lowered that to 15 minutes, then I would always show up for the 15 minutes. And that would always usually go past an hour which was great. So that’s fantastic advice.

I’m wondering when you’re doing all the research for the book if you came across any core keystone habits that then led to big life changes in other ways. Just from my personal experience, I started going to the gym two years ago and just lifting three or four days a week. And that’s the thing that eventually got me to floss which is something I was always trying to do for the previous 10 or 15 years—which is crazy.

And the reason is like I would go to the gym, and then I would obviously want to eat healthier. So that led to a better eating habit which often entailed lots of seeds and nuts. And then, that would lead to me wanting to floss because I had seeds in my teeth all the time.

And it also led to not drinking as much beer because I did all these hard work at the gym, so I didn’t want to ruin it by just drinking a bunch of alcohol.

So, it was like one core habit that then led to these three other habits of healthy eating, less drinking and flossing that I never even anticipated.

I was wondering if you came across any sort of other habits like that that led to other great changes.

James Clear: Isn’t that interesting how you eat better when you work out? You could be like, “Oh, no! Now I actually did something. I can have a donut.” But instead you don’t want to waste it.

Mad Fientist: Exactly!

James Clear: I had a similar keystone habit. Mine is also working out. I usually train four or five days a week. And if I get those four days in, then a lot of other things happen, similar to what you mentioned. I’ll sleep better at night because I’m tired from working out, which means I wake up in the morning and I have more energy and I’m better focused. I eat better because I don’t want to waste the effort that I put in at the gym. I get this post-workout high for an hour or so where I’m really focused. I have some clearer thoughts and can write well.

And at no point was I trying to build better sleep habits, focus habits or energy habits or whatever. It was all just this natural ripple effect that came from getting into the gym.

And there are some common ones to answer your question. Exercise is a popular one. Especially among creatives, you’ll hear going for daily walk is a big one.

There’s a book called Daily Rituals by Mason Currey. And it talks about the daily rituals and habits of a lot of these famous writers and scientists and musicians and so on. And it’s an interesting read. You end up finishing it and feeling like 80% of them were on amphetamines or alcoholics or some kind of crazy addiction. But the ones who were clean, going for a daily walk is often a huge part of their process. So that’s one.

Budgeting, interestingly, is one. When people pay off their debt or get their finances in order, they will sometimes start working out or they’ll start eating healthier and so on. It kind of ripples into another area.

For performers, visualization is often a big one; comedians for example. They do the same kind of visualization routine each time before they step on the stage. Or basketball players, same kind of thing, they’ll visualize before the game.

And then, the last one I’ve come across that’s fairly common is meditation. You’ll hear CEOs say that if they get their 10 minutes of meditation in each day, then the rest of the day feels like it kind of goes better or they’re more well-equipped to handle what happens throughout the day.

And for people who are listening to this, what I would suggest is you don’t have to do all of those of course. You’re just trying to figure out what is the keystone habit for me. And I think you can simply sit down and think about it for five minutes. “What do I do on days when things go well for me, when my life seems to feel like it falls in line? What usually happens on those days?” or “If I was going to plan out my ideal day, what would be included?”

And you’ll usually come up with maybe two or three of those things that I just mentioned or something similar that feels like “Okay, maybe this could be a keystone habit.”

And then, I would say forget about everything else. Just focus on that for the next month. And really, you can combine the strategy we just talked about. How can you make the first two minutes of meditation as easy as possible? Or how could you make the first two minutes of the workout as easy as possible?

And what you find is there’s kind of an ironic thing about making change and how habits sort of compound and make a difference in our lives. There doesn’t necessarily need to be that much to do. You could just focus on what you think this keystone habit could be and the first two minutes of it, making it as easy as possible to start.

And if you just did that for a month, you might find that there are all sorts of positive benefits that are happening a month or two or five months later. I would encourage people to start there. It’s a nice, easy, but high value way to get started.

And that’s one of the things that I try to focus on the book, what are these tiny changes that can lead to remarkable results in the long run.

Mad Fientist: Yeah, absolutely. You sent me the first three chapters because the book’s not out yet. I haven’t got the full copy yet. I can see why you sent me the first three. It sucked me in so much. I can’t wait for the rest of the book.

Although I could talk to you about habits all day, I think the book is going to cover it beautifully. And it’s called Atomic Habits. And it’s just like as you said. They’re small, tiny habits that just have big, big changes. You can make your life completely different just with a tiny, little habit.

I definitely recommend to anyone to go out and get it. I’ll put a link in the show notes.

But since the book covers it so well, I’m going to move on to another topic that I’m really interested in that you cover so well. And that’s deliberate practice. So I don’t know. If you wouldn’t mind, maybe just give a quick run through of what deliberate practice is, and then how that is different from habits. Habits are sort of the enemy of deliberate practice which is what you’ve said in some of your posts. And maybe explain why.

James Clear: Sure. So you haven’t seen the section yet, but the last chapter of the book is called The Downside of Good Habits. It references this issue, this dichotomy between habits and deliberate practice.

And deliberate practice, just to give us all a working definition here, I think most of us are familiar with putting some kind of practice in, but then it becomes mindless.

You’re a kid, and you’re practicing piano all the time, you’re just kind of like […] putting the work in because your parents told you to be there, or you’re shooting a basketball outside, but you’re just throwing it up, you’re not really thinking about it carefully.

Deliberate practice is the opposite. It’s focused, purposeful practice. So, one example that I give in an article that I wrote on this topic is imagine two players who are shooting free throws on a basketball court. The first is just shooting, takes some breaks, talks to friends or whatever. The other one shoots. And after every 10 shots has recorded how many they made, how many they missed, and the ones that missed, where they missed. Was it too long? Was it too short? To the right, to the left and so on…? And then, they review that after every 10, and then they shoot another set of 10 and do it again.

Okay, if these two players do this for an hour, who do you think ends up shooting better?

And the point here is that purposeful deliberate practice, focused practice where you’re paying attention to the errors and mistakes that you make, it makes you aware of what you need to do and where you need to improve.

And this is where the conversation returns to habits which is that, in the beginning, one of the most important and essential things for building a habit is to put in your reps. And in fact, what you find is that habits are a prerequisite for mastery. They’re required to build this foundation.

If you want to be a great chess player, for example, well, you need to automate and effectively learn how all the pieces move and where everything goes and be able to do that on autopilot before you can think about advancing to the next level of the game, starting to think about deeper strategy and so on.

And this is true at every level. As you progress up, you need to be able to internalize and automate whatever the skills were that you were working on, that you were practicing deliberately, and then use that as the foundation for the next level of deliberate practice.

Now, the challenge is, as something becomes a habit—and this is kind of the point of building habits—is that you pay less attention to it. Once you can do it on autopilot good enough, you stop thinking about how to do it better. You stop paying attention to maybe where your mistakes are.

And in fact, there’s a body of research that shows this, that as people habituate and internalize different tasks, there is often actually a slight decline in performance.

So, for example, they’ll often find that surgeons have actually the best outcomes like pretty early on in their career, maybe a few years out from residency. And then, after they’ve been doing it for years, there’s maybe a slight dip. It doesn’t mean they’re bad at it, but they aren’t at their peak anymore. And a lot of this is because of the fact that we overlook our errors and mistakes as things become habituated.

So, the process of improvement, it’s sort of like a cycle. It has to start with some level of awareness. If you’re not aware of your habits, or if you’re not aware of your behaviors, then it’s hard to design them in any meaningful way.

Then there’s a period of deliberate practice where you’re practicing a new habit for the first time, or you’re working on a new skill, and it requires effort, attention and focus. But with practice, it becomes a habit. And then, eventually, we have to close the loop and return back to awareness because now we’re on autopilot and we have to come back to where we were before.

And so that’s kind of how I see habits and deliberate practice working in concert with each other. We need to habitualize skills so that we can free up the energy and attention to focus on the next thing. Like all the best basketball players in the world can dribble with their left hand without thinking (or their opposite hand without thinking), and that allows them to work on other stuff like complicated shots or different offensive schemes or where do they need to be on the quarter, what time, all that type of stuff. But it’s only once you’ve habitualize the fundamentals that you can move on to the advanced stuff.

But once you get to that point, it’s a never ending cycle. You need to use that as the foundation for the next level of growth and deliberate practice.

Mad Fientist: Right! Okay. Yeah, that’s great. I’m excited that you do talk all that in the book. I think that seems like a very important piece.

I’m wondering… I imagine you’ve worked with some top performers and some impressive people to work through some of these things. And the one thing about deliberate practice for me that is a bit complicated—

It’s like, okay, for something like practicing guitar, it was perfect for that. I have played guitar since I was 10, and I was learning this Back classical guitar piece for maybe 10 years. And once I stopped lessons, I was like halfway through it. And this 10-year period of me just playing it, getting to the part where I didn’t know, and then trying to learn that next part, but not really focusing, it was like useless. It was like me playing for three minutes the part that I knew, playing two seconds the part that I didn’t know, and then screwing it up and then starting again and thinking that I’ll get better somehow doing that. And I honestly did that for like 10 years. And then, once I learned about deliberate practice, I was like, “Okay, this is ridiculous! I need to actually focus on the part that I can’t play, not keep playing the part that sounds great and makes me feel good about myself.”

So, what I did was I slowed down the tempo and just practiced the part that I couldn’t get. And then, once I could get it, I brought the tempo back up. And then, I integrated with the rest of the piece. I just did that for a few months, and then, eventually, just nailed the whole thing when, like I said, 10 years of just playing it randomly just didn’t work and didn’t get me any further.

And that makes sense. Deliberate practice there, my feedback is listening to this bad sound, realizing that I need to practice it, slowing it down, and that all make sense.

But for something like…

Right, exactly. Oh, exactly. It was insane. It was so quick to then just perfect it when practicing the right way. Okay, so that makes sense to me.

But for something like songwriting or something that’s not as like, okay, you’re just putting in the reps, have you ever had to work with anyone in that sort of scenario where it’s more maybe creative and less defined practice routines? And if so, how do you tackle something like that?

James Clear: Yeah, this is one of the criticisms of deliberate practice as a field. It works really well for well-defined fields especially sports or any type of competition where success is easily measured. For example, did you play the correct note or not? Or did you make the ideal chess move or not? Or did you end up with most points at the end of the game? Then it’s very easy to measure whether you’re moving in the right direction.

And I have a chapter in the book where I discuss measurement a little bit. And one of the challenges of measuring—

Well, one of the benefits of measuring is that—well, there are three things really.

The first is that measurement makes a habit more obvious. It makes a behavior more obvious. So by measuring something, you become aware of it.

Secondly, when you’re making progress, there’s an additive effect to measurement. For example, by tracking each time you do a behavior, or each time you perform a habit, like if you put an x in the calendar every day that you practice guitar, then you start to see those build up, and you get motivated to stick with it.

And then, the third thing—and this is kind of essential to the conversation we’re having now—is that a measurement makes a habit satisfying. It adds an immediate bit of gratification to doing the work. So if you’re able to check an x off on the calendar, then you feel like “Oh, this is good. I got my work in for today.”

So, even though you might not be able to play the piece in full yet, which is what the real thing you’re working toward, it doesn’t feel like you totally have to delay gratification because you still get the immediate gratification of measuring it and marking an x off and so on.

Now, the challenge is that—and this is something that’s called Goodhart’s Law—a measure ceases to be a good measure when it becomes the target. In other words, a measure is only useful when it informs you or when it is a bit of data that kind of nudges you toward the ultimate thing. But when it all becomes about the measurement, when the only thing that matters is hitting the quarterly numbers in the business, or hitting a particular number on the scale, then you start to sacrifice—like you don’t even care about health anymore, you just care about hitting the number on the scale. And so you’re over-focused on measurement.

I would say that that can actually be a downside to deliberate practice, is that sometimes if you’re so focused on measurement, it can pull you off course.

So, the question that you asked about some of these fields that don’t necessarily lend themselves to measurement or more creative, a little bit less quantitative or harder to measure, it doesn’t necessarily mean that you can’t perform deliberate practice, or even really that it’s a disadvantage. It might not be as quantifiable.

But what I would say is what you’re looking for, one of the purposes the measurement should provide, is that it provides an emotional signal that you’re moving in the right direction. It provides a signal of progress. And that’s really all that you’re looking for.

So, in a creative field, you can have that, but maybe it just has to come in a different way.

So, an example, let’s take the scale and the weight example I just gave. If you’re obsessed with the number on the scale, then that measure is no longer really that productive or beneficial to practicing good health, whether that’s a diet you’re trying to follow or a workout you’re trying to do. And so it might be more useful to shift to a different form of measurement, so to speak, that gives you feelings of progress or makes you feel satisfied. So, this is where stuff like non-scale victories come into play.

Maybe you stop looking at the scale, or maybe the number on the scale hasn’t moved, but you feel like your energy is better, or you can fit into a pair of jeans you couldn’t fit into before, or your skin looks better in the mirror, or your libido is up. All of these are measurements, in a certain sense, that you’re making progress.

And when you’re dealing with a creative field or something that is not as quantifiable, you have to start looking for things like that. So you may not be able to track it, but how can I find a positive emotional signal that I’m making progress and I’m moving in the right direction. And that of course depends on what kind of field you’re working on and what the particular problem is.

But the core point is that behaviors need to be satisfying for you to have a reason to repeat them. And it’s particularly important that they’re immediately satisfying, that you kind of feel successful right at the ending of the behavior. If you do, then it’s like a signal to your brain, “Oh, hey, this felt good. You should do this again. You should practice again.”

If all you feel is negative emotion or some kind of pain or punishment or sacrifice, then you don’t have much reason to repeat the behavior. And this is why we often find ourselves slipping into behaviors that just feel they’re in the moment even if they don’t serve us in the long run.

Mad Fientist: Right! Yeah, no, that rings true with my experience as well. At first, for the songwriting thing, it was like, “Okay, my goal is to write this song,” and then I would finish it, and it wouldn’t be very good because it was like the first song I wrote. I would be pretty disappointed with it.

So then I’ve since switched over to recording just the number of hours that I put in because that’s something I can’t control. I’m also recording the number of songs I have finished it. And then, I’ve given finished songs to my brother to go through this Google form that I’ve created to actually grade it so that I’m getting some external feedback because I know that’s so important in deliberate practice as well.

And that seems to be working better because when I get to the end of my, say I do two hours, then I feel really good because I can put in my spreadsheet I did two hours. And that’s two hours of hard work that I put in.

And then, obviously, it’s nice to put a one or a two next to the month if I completed one or two songs that month because that’s the actual end goal, was to write songs. And then, obviously, getting that external feedback is always great especially from someone who I don’t care if he know it sounds like crap.

James Clear: I think people who appear to be good at delaying gratification—which is something that a lot of us comes back to or a lot of the research talks about, like you need to be willing to stay focused and stay aware of your mistakes and continue to improve and delay the ultimate gratification of writing a song or being good at whatever the craft is. But what I find or what my theory is that people who appear to be good at delaying gratification or often just good at finding alternative ways to be satisfied in the moment. So, for you, it’s recording that on the spreadsheet. It gives you a reason to feel successful right then.

And that’s particularly important for building a habit or for having some reason to revisit it. There are all sorts of examples of products that have done this. So, for example, chewing gum had been around for decades, hundreds of years, before it became really popular. And that’s because, for a long time, it was just chewy, but it wasn’t tasty. It was like this kind of bland resin.

And then, in the late 1800s, Wrigley created Juicy Fruit and Spearmint. And they added flavors to the gum. So it was like immediately satisfying to chew it. And all of a sudden, chewing gum exploded, and they became the biggest chewing gum company in the world. And it was largely because there was suddenly like this immediate feedback loop, this immediate sense of satisfaction.

Mad Fientist: Right.

James Clear: And that doesn’t work for every habit. You can’t always have some instant bit like that. But what I think the ultimate form of immediate gratification is is a reaffirmation or a reinforcing of your identity.

So, if you want to be the type of person who writes music every day, then each time you sit down to write music, you are being that person. And once you start to adopt that identity, that’s a very powerful place to be.

For me, part of my identity is I’m the type of person who doesn’t miss workouts. So each time I go to the gym, I’m like casting a vote for being that type of person.

And it might take months for me to hit whatever number I want to hit on a particular lift or for my body to change in the mirror. But each day, I get to have that sense of satisfaction of forging that identity and being that type of person.

And that’s one reason why I think identity-based habits are so powerful because if you can root it in a belief like that, every time you do the behavior, you are being that. It’s sort of an instant form of success.

Mad Fientist: Yeah, that’s huge. And that goes back to the whole eating healthy and not drinking as much beer after working out because I felt like, “I’m a gym guy. I’m an athlete. I’m a lifter” and all these other things that I never thought I was before when I was just a geeky, lazy computer programmer.

James Clear: I think that’s an important point, that you don’t want to cast votes for competing identities. If you go to the gym, and then you go eat ice cream afterwards, it’s kind of like, well, it sort of cancels out. Which identity are you?

And so, I think it’s important to find ways to reward yourself that, reinforce that identity that you’re looking to build.

For example, if you’re talking about FIER and people saving for retirement, well, you could say that your reward for hitting some savings goal is like buying a leather jacket. And there’s nothing necessarily wrong with that. But it sort of conflicts with the idea of saving.

It could be something like your reward is you go camping for a week, or you get to go for a walk in the woods, or you have 30 minutes to yourself for a bubble bath or something, those type of rewards more align with this idea of like “My ultimate goal is to have freedom and control of my time.” And so you’re casting a vote for that identity whenever you save because you’re saving towards freedom and optionality and power and in control of your time. And when you reward yourself with that, like “Okay, now I get 30 minutes just to relax,” then you’re kind of like reinforcing that identity again.

Now, I think that it’s important to find ways to reward yourself that still reinforce the desired identity.

Mad Fientist:Yeah, absolutely.

I’m going to switch gears a little bit because this is something that you have directly changed in my life, so I really want to talk to you about it. And that’s intermittent fasting. My wife sent me an article from your email list about intermittent fasting. And it already aligned closely with my eating habits to begin with. So it was a fairly easy change to switch over, but it’s been great.

I just want to maybe get you to quickly describe it, and then maybe talk about your personal intermittent fasting schedule and what you find is the most optimal for you.

James Clear: Sure! So I’ve been doing intermittent fasting for—it’s been a while now, I’ll probably get this wrong. It’s been at least five years, probably more like six or seven. And I’m not militant about it. I probably do it, I would say, 330 days out of the year or so. But if I can’t do it while I’m traveling or if I’m on vacation or we have things over and things change, I’m not really worried about that.

And this is sort of a theme of my approach to intermittent fasting (and really a lot of my philosophy for approaching other problems of behavior change or improvement) which is that we need to stretch the time scales out a little bit. Like you don’t need to worry so much about what you’re eating on a 24-hour basis or even on a smaller scale like are you having a meal every hour or something.

So, to get everybody up to speed, intermittent fasting is not a diet. If you want to change your diet or eat Paleo or Keto or vegan or whatever, that’s a different conversation, the type of food that you’re eating. It’s simply a schedule for when you eat.

The most popular style is an 8/16 split. So you would eat all of your meals during eight hours. Usually, for me, it’s somewhere around noon to 8 p.m. And then, you fast for the next 16 hours. So you’d stop eating around eight, and then you don’t eat until noon the next day. So, in this example, you would be skipping breakfast.

There are other schedules that you can follow. For example, some people eat their normal patter six days a week, and then they just fast for one day. So like on Sunday, they just won’t eat anything. They’ll just have water for example.

And this is some of the most common questions I get. “Can I drink water? Can I drink coffee?” Yes, you can. I drink tons of water. So you continue drinking throughout the day.

Coffee, the general rule of thumb is if you have less than 50 calories while you’re fasted, then you’re not going to break the fasted state. Now you can’t just keep having 50-calorie things because then those eventually adds up and crosses that threshold. But if you want to have a cup of coffee with a splash of milk in the morning, that’s probably fine.

So, the reason intermittent fasting got popular is—it was largely popularized by Martin Berkhan who runs this Whole Lean Gains. And he was this big, ripped bodybuilder. He followed this pattern. And there is some scientific evidence that shows that fasting like this will alter your insulin levels and put you in potentially more a fat-burning state.

I was mostly interested in it from a simplicity standpoint. I like having one less meal to prep each day. I like having one less meal to think about each day. I like having one less meal to clean up for each day.

I work out of a home office. And so I loved the fact that I wake up, get ready, have a glass of water, walk 10 seconds to my office, and I can be writing or into whatever work I need to be doing really quickly. It removes another point of friction at the beginning of my day. So, I like that, that I can get into my day right away. And I like the fact that it simplifies my life a little bit.

The other thing is—and this comes back to the timescale piece I mentioned earlier—I was interested like is this going to affect my training. Will it affect my workouts, my energy levels throughout the day or what-not?

I don’t know if it’s from advertising or if it’s just a societal conversation now, but I think that we’ve become a little too hyper-focused in making sure that we eat all the time. Let’s say you eat 2500 calories in a day. Well, if you have 2500 calories between say noon and 8 p.m. like we’re talking about here, or you have 2500 calories between say 8 a.m. and 8 p.m., and you eat breakfast at eight, well, at the end of each day, does it really make a big difference? I kind of feel like your body is going to figure out what to do with the food. I just don’t know that it’s going to be that meaningful.

And to kind of further the point, most of us have had—you know, you go out for drinks on Friday night, and you sleep in on Saturday or something. And then, you don’t eat brunch until 11:30 or 1:00 even. So you’ve kind of unintentionally intermittent fasted that day, and you didn’t think twice about it. It wasn’t even a big deal at all. You were fine.

So, many people, it happens too randomly every now and then anyway. So to do it in a little bit more consistent fashion, I don’t think as meaningful of a difference as many people worry about.

And this is one of the weird things about intermittent fasting, which is that for many new behaviors and habits, they’re very easy to do mentally. Mentally, like, “Oh, yeah! Of course I should go to the gym and work out for two hours to get fit and do all these stuff,” but then they’re really hard to practice physically. You go there and it’s like, “Oh, man! After doing crossfit for two weeks, I’m out of here!” But intermittent fasting is the opposite.

It’s incredibly easy to do physically. You do nothing. You just don’t eat a meal. The hard part is mentally. People are like, “Wait! Skip breakfast?! I can’t do that. That sounds crazy!” And as soon as you can get over that mental hurdle, it’s incredibly easy to practice. All you do is just grab a glass of water and get to work.

Mad Fientist: And it gets easier and easier, I’ve found. Your body just adapts so quickly to the new schedule. I feel less hungry even in just odd times than I would in the normal schedule.

James Clear: Oh, I don’t even think about it now. Yeah, it’s automatic.

Now, okay, so some people are going to wonder about the fat loss benefits and does it actually burn more fat and all the type of stuff. My personal opinion is that—and there had been researches done on whether intermittent fasting adds up and makes a difference like that. Most of the research is like, if it does, it’s a minimal effect. But the real reason I think people lose weight when intermittent fasting is that they eat fewer meals. And because they’re eating fewer meals, it’s kind of—

If you just eat your normal lunch and eat your normal dinner, by the time you finish that meal, you’ll probably feel about the same as you usually do. And so you just cut a third of the calories out (or if you have a smaller breakfast, maybe it’s a fifth of your calories each day). And even if you have a slightly larger serving at lunch and dinner than you normally would because you didn’t eat in the morning, you probably aren’t having 1 ½ times more. And so, the end result is maybe you cut out 100 or 300 or 500 calories a day. And once you do that, and just stick to that for three months or six months or whatever, then yeah, you end up losing a little bit of weight.

So, I think it’s kind of a brain dead, simple way to reduce the number of calories that you’re going to have. And by doing that, eventually, it adds up and you also reduce the amount of weight that you have.

Mad Fientist: Yeah, especially considering how sweet and sugary most American breakfasts probably are, especially the ones that are grabbed on-the-go. So it does make a lot of sense.

As far as someone like me who is lifting and who’s trying to put on mass a bit rather than lose weight, have you found the lean gain’s attitude of maybe doing a protein shake or something before a workout beneficial?

James Clear: Yeah, I’ve been trying to and have been slowly bulking up for, I don’t know, a couple of years now. But I am now mostly in the maintenance phase in the sense that I don’t need to get that much bigger than I am now (although I would like to continue to get stronger, so we’ll see how that goes. Usually, those things don’t add up well together).

I train in the evening, usually around 5 p.m. or so which means I’m in the middle of my eating window. So I don’t have to train fasted.

Mad Fientist: Sure.

James Clear: Now, if you train in the morning—which I have done, I have trained fasted before—if you’re going to lift for an hour or so, I don’t think it makes that big of a difference. If you want to have a protein shake, that’s probably fine. I would look for something that is on the lower calorie end.

Sometimes, if people are getting really obsessed with it, they want to have BCAAs instead of an actual protein shake because then they don’t have to worry about the calories. But if you’re going to do something longer than an hour or an hour and a half, you’re going to do a 3-hour bike ride or some kind of endurance training for a triathlon or something, I don’t know that my recommendation would be to train fasted if that’s the case.

Mad Fientist: Sure.

James Clear: I think that it’s probably better to have something before a long train session like that.

But as with all of these stuff, your mileage may vary. And I think the best thing to do is just to try it out and test it a few times and see how it goes. That’s what I did. And I ended up settling on, yeah, I get my best lifts in when I’m lifting in the early evening rather than in the morning.

Mad Fientist: Okay. Do you do any sort of longer fasts, like 24-hour or 48-hour fasts or…?

James Clear: Sometimes, I find that to be a very effective strategy. I think the longest I’ve done is 36 hours or something like that, maybe 40. But sometimes, I find it to be an effective strategy when I’m traveling because, a lot of times, airport food is terrible. And so, if you just treat it as “Alright! I’m just going to fast for today,” then you just grab some water, then you go to your destination, and then you wake up the next morning and have breakfast, sometimes I find that to be useful.

Mad Fientist:Cool! Well, we’re getting to the end of the hour. And I want to be respectful of your time. I’m sure you’re a busy man these days. So I usually ask all my guests what’s one piece of advice they’d give to somebody on the path to financial independence. I’m going to ask you, but you’re welcome to take it a non-financial direction or keep it financial. It’s totally up to you.

James Clear: Well, I write not just about habits, but also about decision-making and mental models. And one of my favorite mental models—or just you could think of this as like a lens for looking at the world—is inversion.

The way that inversion works is you take what you want to achieve, and you imagine the opposite. So, for example, the ancient stoics and Greeks philosophers, they used to perform what they would call a premeditation of evils. So they would meditate or think about the opposite of what they wanted. For example, “What if I became homeless? Or what if I lost the ability to walk? Or what if my spouse left me?”

And the point is not to make yourself depressed about these things, but to think through what the scenario would be like to try to fortify your mental outlook so that you could be able to handle when life throws something your way, and then also, and most importantly, to be able to prepare for that. So what can I do to prevent that from happening?

And I find that to be an incredibly effective approach for dealing with daily life and of course with finances as well.

So, the question you can ask yourself is: “Alright! If I want to retire early, what would I do to make sure that I could never retire?” Well, maybe I would buy a house that would be like way beyond my ability to pay, or I would purchase more cars than I need, or I would spend money on frivolous things and not save automatically each month.

And the point is, as you go through this exercise and get more deep with the details, you start to identify essentially what are the stupid things that you should make sure you don’t do. And this is something that Charlie Munger (who is Warren Buffet’s long-time business partner), he says that much of the success that they have had in business has not been because they’ve been incredibly intelligent, but because they’ve avoided making stupid mistakes and dumb decisions.

And this sounds simple, but it’s actually harder than you’d think in practice. And one of the reasons is because of lifestyle creep. People get a promotion, and then they’re like, “Well, maybe we could get a bigger house. We could afford the mortgage payment.” You start talking yourself into all sorts of things that may not be ideal to your particular situation or for your long-term goals.

And so, I think it’s important to practice inversion on a consistent basis just to try to see what is the other side, what would be the dumb decision that we don’t want to make a mistake on, and how can we prepare and prevent that currently.

Mad Fientist: That’s a very cool answer. And yeah, I remember I think reading an article maybe on your site that talks about that. So I will try to find that and I will put a link to that and all the articles that I’ve mentioned in the shownotes, and also a link to the book which is Atomic Habits, which I’m super excited to finish.

So James, I really can’t thank you enough. This has been a treat. I can’t wait for my wife to hear it. She’ll think I’m the man for being able to talk to you and ask all these questions that she’s been forwarding these articles for years. So I really appreciate it. I wish you the best of luck with the book. And anything I could do to help, I’m happy to. So thank you so much for being here.

James Clear: Oh, thank you so much, yeah. I really appreciate it. And as one final thing, if folks are interested in checking the book out, is the best place to go. You can find the book there.

Mad Fientist: Oh, perfect! Excellent! That’s great, James. Thanks so much. And I’ll hopefully speak to you soon.

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Travis Shakespeare – Playing with FIRE Tue, 02 Oct 2018 12:08:14 +0000 The director of the "Playing with FIRE" documentary joins me to talk about the film that has the potential to take financial independence mainstream!

The post Travis Shakespeare – Playing with FIRE appeared first on Mad Fientist.

If you’ve been reading about financial independence for a while, you’ve likely seen that the topic is getting more popular lately.

Although FIRE (Financial Independence / Retire Early) is far bigger than it was when I created this site in 2012, it’s still nowhere near mainstream.

That may change though…

A full-length documentary called Playing with FIRE is currently in the works and the film has the potential to reach millions of people that blogs or podcasts never would.

This is a huge deal.

Check out the trailer below to see why I’m so excited:

I was asked to take part in the film and was lucky to get to know the talented people behind the documentary.

On today’s episode of the Financial Independence Podcast, I’m excited to welcome the director and executive producer, Travis Shakespeare!

Listen to hear how the documentary came about, discover what Travis has learned about FI after spending the last year creating this film, and find out when you’ll be able to see it!

Note: A Kickstarter campaign has just been launched to help fund the final editing phase so if you want to ensure the film becomes a reality, click here to back the project!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here

Show Links

Full Transcript

Mad Fientist: Hey, welcome everyone to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence.

Today on the show I’m excited to welcome Travis Shakespeare who is a big time Hollywood executive. He’s a producer of popular TV shows. He’s been nominated for many different awards like Emmy’s and James Beard’s.

He’s generally a very impressive guy, but that’s not really how I know him. I know him as a friend. And we go way back to the Ecuador Chautauqua back in 2015 which is where we met. And we’ve kept in touch ever since. He’s a really smart guy that I’ve had great chats with over the years.

So, I’m excited to get him on just to talk about his story and some of the things that we’ve discussed over the years. But more importantly, I got him on the show to talk about the project that he’s currently working on which is a documentary that I’m extremely excited about. I think it’s really going to be the project that takes this whole FIRE thing to the next level and potentially brings this whole FIRE idea into the mainstream.

So, for the past year, Travis has been working with my other friend, Scott and Taylor. They’ve wrapped up filming. And the premiere of the trailer is going to take place next week at FinCon. So it’s a really exciting time. They’re just launching a Kickstarter to help fund the final push of this thing. And hopefully, it will be released in January or February of next year. So, it’s really exciting.

I’m personally in the film which is insane to me. And so is a lot of people that had been on this podcast actually like Mr. Money Mustache and JL Collins and Mrs. Frugalwoods. And it’s just going to be really exciting to see the concept of financial independence and early retirement on the big screen.

So, there’s a lot I want to get into. I’m excited to have him here. Travis, thank you so much for being here. I appreciate it.

Travis Shakespeare: No worries! I’m very happy to be here.

Mad Fientist: So, we go way back. We go back to—I think it was maybe around this time actually of 2015, my first Ecuador Chautauqua and your first Chautauqua as well, right?

Travis: That’s right, yup! 2015… wow!

Mad Fientist: I know! It’s crazy. So, over three years ago. And we’ve seen each other a lot ever since. We came and met you guys up in LA. And you’ve come to Edinburgh. And we’ve kept in touch all these years. So it’s good to get you on the podcast finally. I’m super excited of what we’re talking about.

But before we dive in to all the stuff I want to talk to you about today, can you just maybe tell people about yourself?

Travis: Oh, yeah. Absolutely!

I’ve worked in entertainment for the majority of my life. I started out actually as an actor, as a young man. And over the past few years, I kind of developed a career in non-fiction television. Some people call it reality TV. Most of the stuff I’ve done has been nature and survival and things like that. My big show on the air right now is called Life Below Zero on National Geographic.

Mad Fientist: I want to dive into how you found this whole financial independence thing and what put you on that path.

Travis: So, that… that happened really when I was about 40 years old, so ten years ago. And what had happened was my father was diagnosed with ALS. And he passed away. I was still $40,000 in student loan debt. I still had credit card debt. I came up as a starting artist. So I always thought that I was going to get a big break and suddenly land million of dollars from some, I don’t know, movie that I got to perform in or direct. I don’t know what I thought. I think I had what I now call lottery mentality which is very common actually in our culture.

I was broke. My dad was a schoolteacher as I said. And his pension went to my mom. So, me and my sister inherited $150,000 to split that he had in a Vanguard Star fund. So, we split that. I paid my sister for half the value of his Honda Civic, his 2005 Honda Civic and paid off my student loans and my credit card debt. And for the first time in my life, I had like $22,000 in the bank in savings.

I panicked because I had no idea what to do with the money because I was completely financially illiterate.

I mean I was very different from so many other people that are in this community. I was a classic financial illiterate basically. I didn’t invest. All I knew is that I needed to do something with my money.

So, I picked up a copy of William Bernstein’s The Intelligent Investor because I thought I was intelligent and intelligent was in the title. And it was so hard for me to understand. It was so complicated. And I was like, “Oh, no! I’m doomed. What am I going to do?”

So, from there, I just started searching on the Internet, and I found actually Get Rich Slowly. I had been using JD and Dave Ramsey’s approach to paying off debt before my dad passed away. And slowly but surely, I made my way around the financial independence community.

First, it was either Jacob’s book, Early Retirement Extreme or Pete’s blog. I can’t remember which. It probably happened between the same week or something.

And I read Early Retirement Extreme. And although that book was really truly extreme and super fascinating for that reason, it resonated with me because, as a struggling young artists, that’s the way I always lived. I didn’t want to live like that. I wanted to be rich. But I was good at living poor.

And then, I read Pete’s blog post, The Shockingly Simple Math which everybody points to. And I was like, “Wait a minute! This is a path that I can actually execute. This makes sense to me. It’s part of what I’ve already done in my life. All I have to do is apply a few of the new tips and tricks, and I’ll be on my way.”

Mad Fientist: That’s fantastic! Did it change your mentality at that point? If you’ve been living the struggling artist or starving artist lifestyle and probably just dreaming of the big pay day one day, to then read a book by someone who’s doing that on purpose and choosing that themselves, did that sort of empower you or make you feel more happy with your current existence?

Travis: I think what I would say is that it made me feel more comfortable with living frugally I guess because the message is that there’s something wrong with being frugal. The messages are, as we’ve all talked about, “buy new cars… buy cruises… buy diamonds…”

Mad Fientist: Especially in LA where you are…

Travis: Oh, yeah. And let me tell you something. I’m a senior executive now. And I drove my dad’s Honda Civic for almost 11 years. I would pull up to CAA, a creative artist agency, where you can only valet, and there’s like Teslas and Jaguars and Maseratis and everything, I would pull up in my little 2005 Honda Civic and the valets would turn their noses up at me like, “Who’s this joker/starving artist coming to get an agent?”

But then, because I kept the car really clean, and when I sold it, it only had 66,000 miles on it, they would pull it around all the time, they’d be like, “Hey, can I buy your car?” And I always felt vindicated then.

But to answer your question, yeah, I felt more comfortable being frugal. I think more than anything, emotionally, it made me feel relieved and like I might have a chance at not ending up eating cat food in my old age.

Mad Fientist: Right! Nice…

So, obviously, it was forced frugality for a while. But are you a naturally frugal person do you think?

Travis: You know, you and I have talked a lot about your frugality. And you typify to me somebody who’s naturally frugal, like there’s something in your nature that you just kind of go crazy if you have to spend more than you think you’re supposed to on something.

I don’t think that I’m like that. I think that I’m more of a value-driven spender. And that’s probably from the entrainment of being a struggling artist where I would have to constantly make choices, “Is this valuable to me or not? Do I want to spend my money on this or not?”

Speaking of my dad, there’s a story in my formative years when I was about seven years old where my dad taught me this really hard lesson about money. And I loved to go swimming in the summers. I grew up in Colorado. And so summers were really a great thing. And it costs a dollar to go to the swimming pool.

And my grandma, my mom’s mom—who of course I adored because she was my grandma—had recently come back from Las Vegas and gave me a silver dollar that she won out of a slot machine. And I cherished this silver dollar for two reasons: one, because it was a token from one of the people that I loved most in my life, and the other was that it had a magical quality to me. It was sparkly. It was this big piece of silver. I had dreams of what Las Vegas might look like and the idea of money pouring out of slot machines and getting extremely wealthy. Again, back to that lottery mentality which probably is an indicator of whether or not I’m truly a frugal person.

On a Saturday, I went to my dad and I said, “Hey, dad, I want to go to the swimming pool.” And he said, “Well, great! How are you going to pay for it?” And I said, “Well, what do you mean?” And he said, “Well, you’ve got a dollar. And it costs a dollar to get into the pool.”

And I said, “Well, I can’t use that. Grandma gave me this silver dollar, right? I can’t gave that up right.”

And he was like, “Well, you’re going to have to make a choice. Do you want to go swimming or do you want to keep the dollar?”

And as a 7-year old, that was an agonizing moment that I’ve never forgotten. But I chose the path of experience.

I remember very deliberately thinking, “I want the money, but I want the experience more.”

And so, I spent the dollar.

Mad Fientist: No way! Wow! I would’ve not called that. That’s pretty impressive. And was it worth it?

Travis: Absolutely! And it really set the stage for the rest of my life because I’ve always valued experience more than getting money in my pocket.

I’ll tell you one other thing that’s really kind of amazing about that story. I held a resentment against my dad for forcing me into that dilemma I think for most of my life. And when my dad was dying, he lost the ability to speak. My dad was a teacher, so he was a big talker. And it was never lost on him on that when he lost the ability to speak, the people around him suddenly could talk more, you know? He thought that was really funny; and so did we.

And I said, “You know, Dad, I’m going to take this opportunity and tell you everything that I can think of before you die that I possibly can so that there’s nothing unresolved in my mind when you’re gone.”

And I told him that story. And he said, “Come here, I want to show you something.” He had this little jewelry box that he kept money in that I used to steal quarters out of and stuff when I was a kid to go buy candy. He opened up the jewelry box, and he handed me that silver dollar that he had kept his entire life.

Mad Fientist: No way!

Travis: So, somehow, without us ever discussing that, he also knew that that was a seminal moment in my life.

Mad Fientist: That’s amazing! What an incredible lesson to learn at such a young age and to keep that with you. That’s amazing. You still have the silver dollar now. You haven’t gone out and spent it?

Travis: I’ve got the silver dollar in the jewelry box. Those are like a couple of things I kept of his belongings.

Mad Fientist: Nice! Oh man, that’s fantastic!

And yeah, frugality is an interesting thing. It’s something I’m still trying to figure out myself, what makes people naturally frugal. And the person that introduced both of us to this world is Jacob Lund Fisker from Early Retirement Extreme, we actually did something I think last week, talking about how INTJ’s personalities crave efficiency so much. And he linked to this really good article about INTJ personality types, and it talked about how they can’t handle any sort of inefficiency in any system. And I think that’s the thing that drives all of my frugality.

But it’s great to see you that you take a look at value. And even if something is maybe less efficient on the spending side or not as optimal from a financial point of view, you would still make that call. And I’m assuming that’s something that’s continued throughout your adult life as well?

Travis: Absolutely! I mean, it really is my personal north star where money is concerned.

I mean I think that my dad dying put a kind of fear in me, that I was going to be broke. It’s very strange. As a 40-year old man, even though I was 40 years old, and I had established myself in my life to a certain degree, the sense of like not having somebody to go run to in the event of a major emergency which is one of the functions that my father had fulfilled in my life was suddenly gone. And that was really scary to me. It was almost like I had to grow up or something totally unanticipated.

Did you have any kind of seminal moments like that in your upbringing where you had a specific lesson around money that changed your approach?

Mad Fientist: My dad bought me like four or five shares of stock when I was a kid. And this was pre-Internet days. So, I would wake up every morning and check in the paper to see how my stocks were doing. I remember that because I was so into the idea of like “Whoa! This money that we had, we could just put it into these stocks, and then it’ll keep growing and make more money.” So that was a big one.

But no, nothing as impactful as that silver dollar story. I’m so happy you shared that because that’s not something we’ve chatted about over the years.

Travis: No, yeah… I mean it’s just one of those that’s kind of buried in my personal story that comes out very rarely when I think about money.

I’d be really interested to see if somebody did a poll about how many INTJ’s there are in the FIRE community.

Mad Fientist: Yeah! Oh, that was my exact thought. I was like, “I need to try to figure out a way to do a poll maybe just on Twitter or something to figure out how many INTJ’s there are because I couldn’t agree more.”

And according to some of the things I read, that’s like one of the rarest personality types. But yeah, I think it’s a big portion of the FIRE community.

Travis: That would be really, really fascinating. I’d love for you to run a poll. I’m an INFP. So for the people out there that don’t know what we’re talking about, this is the Myers-Briggs Personality Test that puts your personality into certain quadrants, whether you’re primarily introverted or extroverted, intuitive or—what’s the other one?

Mad Fientist: Like feeling…?

Travis: Feeling… perceiving… judgmental (which doesn’t mean judgmental, you’re more like conclusive in your life)… and INFP is the second rarest personality type.

Mad Fientist: Yeah, I’ll link to all that in the shownotes. And I’ll link to the article that Jacob tweeted about because, yeah, it’s interesting stuff. And yeah, if I figure out how to do a Twitter poll or something, I’ll go ahead and do that and see if people can answer because I think it would be interesting to see.

Travis: Totally!

Mad Fientist: But I totally want to go back to what you said about value because value is hard for me post-FI when I’m trying to figure out what actually I do value and what purchases do make me happier. And for someone who lets value drive their own financial life, how do you know what’s valuable and what you should spend money on versus what you should hold back on?

Travis: I think the ultimate litmus test is to always think about your own death which is a very stoic practice even though I wouldn’t have necessarily called myself a stoic. I literally do this regularly. I look at something that I may want or may want to do or something like that, and then I’ll ask myself, “Well, if I were going to die tomorrow, where will this land on my value scale?”

Mad Fientist: That’s fantastic! And it’s a perfect time for me because I just didn’t do something. And last night, before going to bed, I thought about it again, and I was like, “I really should’ve done that.” It was a family event. And since I’m coming to America in a few weeks, I didn’t fly back for it because it was just a week ago. Last night, I was thinking about it, and I was like, “I really should’ve done that.” I really regretted it. Had I had that sort of idea in mind—which I would’ve never asked myself that question that you just said, like “If I’m going to die, should I have done this?”, that wasn’t in my vocabulary. But had it been just a few weeks ago, that would’ve drastically change the decision I made. And I wouldn’t have had the regret that was actually keeping me up last night which is rare. It’s not a usual occurrence to be kept up by thoughts. But I was laying there thinking, “I should’ve done that.”

But have you found that you’ve been true to those values? Surely, especially in somewhere like LA, if you’re in the showbiz lifestyle that you are, it must be hard to constantly keep that in mind when there’s probably so many external pressures pressuring you into other things.

Travis: I mean it can be. I’ll give you an example. Last year, I turned 50. I remember also when I was around my late 30’s or early 40’s, I found this website of like a luxury safari in Tanzania. And I was like, “Oh, my God! I’ve got to do this. This looks amazing.” And I said, “Someday, I’m going to do that.”

And as my 50th birthday approach, I thought, “How can I celebrate this milestone?” And I was like, “I’m going to go on a safari.”

And it was really expensive, Brandon. It was not the frugal thing to do. And now that I’m part of a FI community, I was like, “Geez, the opportunity cost. I can be invest it and be safer in my retirement” and all these stuff. But again, I ran the thing like “If I’m dead tomorrow, which do I want?” And I was like, “There’s no way I want to walk off this planet without spending three weeks on the Savannah in Tanzania” because that’s an incredible experience for a human being to be able to encounter.

And by the way, it’s only because of where we are as a society, in terms of having jet planes and all these other stuff that we can even just jump on a plane and do that. It’s a very lucky scenario in that sense.

Mad Fientist: So, was it worth it?

Travis: A hundred percent! Like no question.

But then, I go to your point about Hollywood, I like clothes. I have a little bit of a thing for nice clothes. But I don’t really buy them very often. And I kind of agonize about that because the difference between a $75 pair of shoes and a $400 pair of shoes is real. The quality of the products is actually drastically different. But if I’m pressed to go “Well, you know, I should get a $400 pair of…”

I’m going to the Emmy’s this weekend, right? And part of me is thinking, “I should buy my own tuxedo. I’m a Hollywood executive. Why don’t I own my own tuxedo?” But I’m too cheap to do it because I’m like, “No way! I can use that $2000 to go visit you in Scotland. So I’m going to rent one for $110 off the Internet instead. Nobody is going to notice. I mean they might, but I don’t care.”

Mad Fientist: It must be a danger for some people because that sort of sounds like the yolo lifestyle as far as decision-making goes. So obviously, you have to trust yourself to some extent to not go crazy because you could’ve easily said, “You know what? If I died tomorrow, I would’ve wanted to be in a really nice tuxedo for my last Emmy appearance.” So is that a worry for some people?

Travis: Well, I think that what you’re asking in a way is about holding to one’s own personal north star versus the pressures of your community, your society. And that’s a huge thing.

I mean, I’ve introduced a lot of people to the FI movement. And they just don’t take on to it. They just don’t take to it. I’ll be really interested to see when this film comes out who is exposed to it that would not have normally searched it out and then does take to it.

What I’ve noticed is a lot of the people that don’t take to the principles of the value-based lifestyle, let’s say, or an efficiency lifestyle, are people who just cannot let go of the narrative that they’ve been sold by, frankly, the advertisers.

So yeah, I think it is a slippery slope if you’re a person who’s more interested in the accolades of other people than following your own true north.

And that’s something that I’ve definitely noticed about the FI community. This is not a community of people who give a shit what other people are thinking. I mean they do care about some people and things like that. But they’re not very susceptible to general societal drifts or pressures.

Mad Fientist: I completely agree. And I can’t wait to dive into the documentary because there must be so many other things that you’ve seen over the last year filming this that are going to be super interesting to talk about.

But before I do, I want to get back to your story. So you found this whole idea of financial independence. And it wasn’t too long after that that you decided to come to the Chautauqua, is that right?

Travis: Yes, that’s right. And deciding to go to the Chautauqua was a funny process for me. I’m not a person who’s like quiet about the FI thing. I tell everybody. I’m like, “Yeah, there’s this community. They’re frugal. They invest.” And people, their eyes spin around. They’re like, “What are you talking about?” But for anybody that would listen, I would tell them.

And then, I was talking to my partner, David, and a couple of friends. And I said, “You know, I think I’m going to go to this Chautauqua in Ecuador. But it’s kind of weird because it’s a bunch of people who are getting together in Ecuador to talk about getting rich.”

And I kind of was like, “I don’t know if that’s…I don’t know what I think about that.”

And then, I saw the schedule. And on the schedule was a day dedicated to community service. And when I saw that, I was like, “Oh, wait a minute! These people are up to something bigger. I want to do this.”

And that’s how I ended up there.

Mad Fientist: That was my first one. And it was weird enough for me to go down there, but I’ve luckily met Mr. Money Mustache and Jim Collins before and things like that. So to be an attendee especially in the early days before it sort of got really popular online and things, it must be a pretty difficult decision. I’m assuming you loved it and didn’t regret your decision?

Travis: Oh, no… not at all.

I mean first of all, that was one of the funnest weeks I’ve ever had in my life. It was just great. The people were incredibly—the people were just so smart and so fun and interesting—and happy.

That’s the thing that always blows me away whenever I get around a group of people that are in the FIRE community. I just have never seen such happy people in my life.

Mad Fientist: That’s true. It’s a great bunch to be around. And everybody is so interesting with interesting stories and goals and pursuits. And it’s always such a fun time.

So, yeah, I’m glad you made it down. We had some really great chats. I think we had our one-on-one together. I just remembered sitting out and looking over the jungle and just having this really deep conversation. And we’ve been friends ever since. And we continue to have these great, deep chats which is great. So yeah, no, I’m definitely glad you came down.

And that was sort of the genesis for the documentary, right?

Travis: Absolutely, yeah. In keeping that with that community service kind of thing, one of the things that I find really fascinating generally about the FIRE community is—and I keep asking this question—“What happens if you’ve got a hundred million millionaires, or 10,000 more millionaires, that are liberated from obligatory work? What can happen in the world when that happens?”

And I’ve asked a lot of people in the course of interviewing everybody for the documentary about whether there’s an obligation in some way to give back. I do feel that way. I feel generally, as a philosophy in life, that it’s not an obligation necessary, but it’s a productive thing for us to share our wisdom. I mean that’s kind of how the human species has flourished, is that we’ve shared and paid it forward and things like that.

So Pete, Mr. Money Mustache, you, Jim Collins and Jeremy from Go Curry Cracker were hosts. And when I got back, I thought, “What can I do to help with this? I’m not a blogger. I’m not a financial expert. But I make media.” And I thought, “Well, I could make a documentary about this.”

So, I reached out to all of you guys to see if you would do it. And you were all like, “Yes!” And I was like, “That’s awesome.”

And then, the hard realities of making a documentary started setting in. Also, I still have a day job. And I kind of got waylaid by my day job, to be frank.

Also, I had two problems. One was funding the documentary because documentaries don’t fund themselves. They don’t even really pre-sell usually. You have to make them first. And then, if you’re lucky, they’ll sell.

And the other problem that I had was I didn’t have an organic narrative to follow as a story.

What I had was everybody who’s in the financial community and everybody who’s become financially independent willing to share their story. But that’s not really a movie.

So, I kind of shelved the project while I was putting together a big TV show. And all of a sudden, I hear my partner, my current partner on the documentary, Scott Rickons on the Choose FI Podcast. And I was like, “Oh, shit! That guy’s going to do my documentary.” I was like, “This is terrible! I shouldn’t have put this off,” talking about putting things off for tomorrow.

And a buddy of mine was like, “Why don’t you just call him and just see what he’s up to?”

So, I did. And Scott and I ended up meeting. I was traveling, and he happened to be in Seattle when I was going through. So I stopped off. We had dinner. And we hit it off and decided to partner.

And the great thing about it was that he and his wife had already decided to embark on this journey of understanding the FIRE community and changing their lives over the course of a year which formed the back bone of the documentary to follow and allowed us to disseminate the information that we think is essential to the movement itself and the philosophy and so on.

Mad Fientist: That’s so great, yeah.

So, I was looking through past emails because I just wanted to sort of get a timeline of when all these stuff was happening.

And before I dive into that, I want to tell you one of the emails I came across which is a Chautauqua one. And the quote was: “I didn’t call in sick with traveler’s diarrhea for two weeks, and then immediately retire as adviced by the Chautauqua crowd.”

So, obviously, that was part of the advice some of us geniuses down there shared with one of the attendees. And luckily, she decided not to go that route.

Anyway, so I was looking through all my emails. And you emailed myself, Jim Collins, Jeremy from Go Curry Cracker, and Pete from Mr. Money Mustache on July 28th 2016. And that was sort of your proposition for this documentary. And as you said, you got busy for a year. And it wasn’t until September 1st 2017 that you ended up meeting Scott. So that was a whole year that went by. You must’ve been extremely excited to get that project revived after a year of working really hard at your day job.

Travis: Oh, yeah. I mean I was thrilled.

And also, the fact that Scott and I hit it off is kind of a miracle in and of itself.

Mad Fientist: Absolutely! And the funny thing is that Brad from Choose FI, he’s a long time buddy of mine. And I remember him. He sent me at least two emails saying, “Hey, I met this guy Scott. He’s doing a documentary. He’s great. You’re going to love him. He wants you to be involved.” And I just kept replying and saying, “No, that’s okay. I’m not interested” because I was like, “No, my buddy Travis is doing the documentary. I’m going to be in Travis’ documentary. I don’t know who this guy is.”

And I think it was like the third email, and Brad’s like, “No, seriously. Just have a chat with him. He’s a great guy.” And it was right around that time that I think I heard from you, and you’re like, “Hey, I met this great guy named Scott. And we’re going to team up on this documentary.”

So, I’m so glad you did because I got to meet Scott and Taylor at—I think it was the 2017 Ecuador Chautauqua. And exactly like you, we hit it off immediately. And I was like, “Oh, this is going to be fantastic especially since you guys teamed up.”

So, can you maybe talk about how you actually teamed up on this project? What roles do you guys each play in this project?

Travis: Yeah. So I’m directing the documentary. I’m also an executive producer. Scott and I, it’s a very small operations. Scott’s the executive producer—he and Taylor, and their daughter, Jovy, up here in the film.

Mad Fientist: So, you met on September 1st last year. When did it really swing into full gear in this thing.

Travis: So, they had already started kind of shooting. They had shot a couple of scenes. I can’t speak for Scott, but he told me this. I think he was relieved to have somebody else helping oversee it. It’s very difficult to put yourself in a movie and produce it and direct it. You know what I mean?

So, I think he was really happy. And since they’ve already kind of shooting, we just jumped right in. We’ve now shot across a full year. We basically just finished our principal photography. And we’re editing. We’ve got our first rough cut as of basically today. It’s our first…

Mad Fientist: Oh, wow! Congrats…

Travis: Thanks. We get a little ways to go. But it’s really great progress.

And you know, this is something that myself and my editor, Adam Barton, who’s just a terrific editor, we’re doing this on the side of our day jobs. Adam works full time in television as an editor. So, most of this has been done on weekend and short weeks throughout the year. It’s been a ton of work, but really rewarding. And we’re pretty happy with what’s coming together.

Mad Fientist: Oh, it’s great. I can’t even imagine what the process is like. I saw how much you guys filmed when we were together just for a couple of days in Dallas. And it as just a ton of footage! I just can’t imagine how you got all of that down into a couple of hours. It just seems such a huge task. But if you already have a rough cut, that’s pretty great progress, I would say, right?

Travis: Yeah. I mean it is daunting. We overshot terribly. But the cool thing about that is that we’re going to have all these extra content.

Mad Fientist: Oh, nice.

Travis: All of the interviews that I conducted, we’re going to turn those into long form interviews that people can actually watch outside of the movie.

Mad Fientist: Oh, great. Oh, that would be great.

Travis: …which I think people will really like.

Mad Fientist: I think we’re able to run through some of the cast of characters that you were able to talk to for this film.

Travis: Oh, wow! We’ve got you, Mr. Money Mustache, JL Collins, Jeremy from Go Curry Cracker, Kristy from Millenial Revolution, we’ve got Ryan Holiday who’s an expert on stoicism, the minimalists are in the film.

The sad thing is that we couldn’t get everybody in the movie. We’re trying to keep it definitely under two hours. Hopefully, something like—typically, you do like 90 minutes. So you can imagine how difficult it is to condense a story plus the information on the FIRE movement and whatever into a 90-minute thing.

Mad Fientist: Every time Scott would tell me more people you got involved, I’m like, “You probably couldn’t even introduced all these people in the 90 minutes.” I was wondering how you guys are going to tackle that problem.

Travis: It’s a problem, but we’re working on it.

Mad Fientist: Nice!

Travis: Vicki Robin is just remarkable. She wrote Your Money Or Your Life. She is just an incredible voice;

JD Roth, Doug Nordman—you know, Nords…?

Mad Fientist: Yeah, Nords from the Military Guide, yup.

Travis: Yeah. We also have Jocelyn Pearson from The Scholarship System, somebody who’s really a leader in tackling the student loan problem. So yeah… I mean there’s many more.

Mad Fientist: Sounds fantastic!

Travis: Who all ends up in the final cut remains to be seen just because we interviewed so many people. But I wanted to get as many voices as I possibly could from the community so that we could explore all the different degrees of what this is all about.

Mad Fientist: Is the documentary different than what you thought it would be way back in 2016 when you first had this idea?

Travis: Okay… so here’s what’s really crazy. No… it’s pretty much exactly what I thought it would be.

Mad Fientist: Nice!

Travis: But that’s just insane.

Mad Fientist: Yeah, that’s great. That’s fantastic. So you’ve been able to relaize your vision which must feel so good.

Travis: Oh, I’m besides myself that I was even able to do this.

The only thing that I didn’t really specifically 100% know would be who would fill the shoes of Scott and Taylor? What would that person be? And what would their journey be? And how would that all come together? That was the only thing that I didn’t really know. But Scott and Taylor are just lovely people. And they carried the film really well.

Mad Fientist: Yeah, I bet! You couldn’t pick two better people to be in it. I wouldn’t think so. No, that’s great.

And did you learn anything about the financial independence, early retirement scene that you didn’t know? You were pretty into the scene to begin with. And you’ve met a lot of the big players. And you’ve obviously read and listened to a lot of content over the years. Was there anything you learned through the process? Or was there any trends that seem to stand out that everyone was talking about?

Travis: Yeah, you know, I think that one of my biggest takeaways—and I kind of discovered this in talking to Vicki Robin—was that there’s an analogy between the FIRE community and the ‘60s, the people that dropped out of society to take drugs and reject the standard system and all that. Let’s call them the bohemians, right? The thing that I never quite understood which I was constantly kind of asking myself as I was making the film was: “Who are these people?” You and Pete, what is the common thread here that binds you guys.

And I realized that there’s this countercultural desire for freedom and a rejection of the standard narrative that’s very similar to what happened in the ‘60s.

Mad Fientist: This documentary is going to obviously take this thing to the next level. It’s going to reach people that blogs and podcasts never will reach. And it’s going to open…

Travis: Can I tell you something?

Mad Fientist: Yes, yeah.

Travis: It already is. This past week, we were featured in the New York Times. It’s now been picked up by Le Figaro which is one of the big French newspapers, El Ray which is one of the big Spanish newspaper. The BBC called today. And we don’t even have the trailer out.

Mad Fientist: Oh, wow! That’s amazing.

Travis: So it’s in the Zeitgeist. And you’re very right about that. I can tell you why I think that is, but go ahead… I’m sorry…

Mad Fientist: No, please, please. No, I would love to hear it.

Travis: Well, I think there’s a couple of things. One is there’s a general panic going on especially in younger people about the future. Because of the Internet, and we’re constantly bombarded with all these information all day every day, there’s a sense of insecurity about the future—I think greater than we probably have ever had as a society.

So, the social safety nets of social security, healthcare, everything is in flux—and potentially, in jeopardy. And also, the financial services community—I was about to get conspiratorial—they have forced the individual into a position of responsibility with their own financial future. And we are woefully unprepared to face that because we don’t teach financial literacy to anybody.

We’re taught to be consumers. That’s what this culture teaches us. You make money to spend money. That is the whole point of the game, “Don’t worry about it. Everything will work out.” And that’s a lie.

Mad Fientist: Absolutely. Yeah, absolutely.

Travis: So, there’s a sense that all of these is just crumbling I think. And so the idea of being able to have some control and some knowledge and some agency over one’s own life I think is very attractive.

Now, the question is going to be how much the community, the subculture, is going to be able to impact the standard narrative that we talked about earlier in terms of the slippery slope of like, “Well, gee, but I really do want to yolo. And I need my Instagram picture and all that.” How much is that going to be able to push in?

My goal personally would be 10%. I think that would be radical if we could get 10% of the broad population onboard with what we’re up to here.

Mad Fientist: Yeah, that would be insane. Just obviously, having a website of my own, I’ve received emails over the years. And just to see the amazing things those people have been able to do after realizing what’s possible and after starting to live this life that’s more directed to their values and their purpose and things like that, just to see all the great things that have been created just from that small subset of people, if you reached 10% with the documentary, I can’t even imagine what the snowball effect from that would be. Have you thought about that?

Travis: I mean I wish for it, but I haven’t thought about what it’s going to look like. It goes back to what I said: “What happens if you have 10 million more millionaires who are free? What happens to communities? What all can you do that is in alignment with your values that can have an impact in the world?”

I mean, one of the hard things about making this documentary is that you guys have already covered the ground of how to pursue the path to FIRE. And so how can we make all that attractive to a broader audience and relatable? That was my undertaking. And we’ll see if it works. I don’t know. It could be rejected. You never know.

It’s so exciting because Vicki and I were talking about the healthcare thing. She ardently wishes that the FIRE community as a whole would take up the healthcare problem in the United States because it’s like a thousand of us, put our minds to it and got really dedicated, we could literally change that conversation.

And that specifically interests us because healthcare is one of the big problems in the United States at least with the whole thing.

Mad Fientist: Absolutely, yeah. No, it’s really exciting to think about. I want to talk more about that because that’s something that we’ve chatted about over the years, living a life of purpose and pursuing the things that are important to you. I really want to dive into that in this call.

But I also want to pick up where we left off in your personal story because there’s so much more that I want to dive into there as well.

Shortly after the Chautauqua, you hit your FI number. But then you then decided to buy a house which then sort of threw a wrench in the old FI number. So I want to dive into that because that was definitely a value bet. It was definitely a conscious decision. It wasn’t like you just ended up with a house, and you’re like, “Oh no, I’m not going to be able to retire.” But I want to talk more about that because I think that was a tough decision for you, and I’d like to hear your thought process on that.

Travis: Yeah. And to be honest, I still question the decision. I reached financial independence per the 4% rule 25 times and all that in about eight years. That was extremely accelerated because I came into the community right when my career started lifting as well. So, I started saving money at a really accelerated rate.

I didn’t change my lifestyle. I kept driving the 2005 Honda Civic. And I stayed in a rent-controlled apartment that I had lived in for—well, I lived there with my ex. This is a crazy story. People were always blown away by this. I lived with my ex in a rent-controlled apartment in West Hollywood. And when we broke up, I didn’t move out. We split, and I moved into one room, and he moved into the other room. And I was traveling a lot from my work, so it kind of ended up working out. And now, we’re great friends, and he’s like family for me. So that was the emotional part that worked.

And then, in doing that, I kept my housing costs extremely low. I think I was paying like $700 a month to live in West Hollywood. But that allowed me to save a ton of money.

Mad Fientist: It’s crazy!

Travis: So, when I emailed you and you told you that I was financially independent, that was at my current lifestyle which was living with my ex as a roommate, driving a very old car and just really not—

I think I sort was feeling emotionally like I wasn’t quite flourishing in the way that I wanted to be. So I started looking at renting an apartment of my own. But because the cost of rentals in Los Angeles, when you start writing the math, it’s like, “Gee, do I really want to rent a crappy apartment for like $2300 or $2700 a month,” which is how much I cost here, “or should I consider buying a place?”

I looked for a year and a half before I pulled the trigger and bought a condo.

And it was a great decision personally. I’m really happy I did it. I’m glad that I have my own place. That all feels really great. But I still question whether or not it was the right financial decision.

Honestly, I think the regret is that it’s so expensive to buy anything in Los Angeles that like I’m financially independent, and I have a high paying job, and I have a good career, and I still can’t afford in a conservative fiscal sense the kind of place that I would imagine myself living in at this stage in my life.

I’m still living in an apartment in the middle of Hollywood. It’s not the greatest neighborhood. I don’t know. I think that’s where I struggle with it.

And then, on top of that, it did set me back in terms of me having hit my number. So, I actually just hit my new number again a month ago.

Mad Fientist: Oh, nice… congrats!

Travis: Thank you. So I’m now financially independent again with my current…

Mad Fientist: And this is something I want to dive into as well. You weren’t really sure what to retire to anyway. So it wasn’t like you were rushing to the exits. You have a great job that gives you access to the industry that is your passion. And you didn’t really have anything pulling you away from that at that moment.

I’m wondering if that’s changed since then or if that’s still the situation.

Travis: That’s an ongoing conversation I’m having with myself. I enjoy working. I mean making this documentary is like a dream come true for me. It’s really fun. It’s a lot of hard work, but it’s really fun. And it’s something that I care about.

If I could do that all day every day, that will be unbelievable. I don’t know if that’s a realistic proposition just because of the way life works. You just don’t get everything you want every day even if you’re financially independent.

I definitely feel the tug of wanting to have more greater agency over the way my life plays out.

When I was a struggling actor, I had a ton of agency over my own life. I mean as long as I got enough money to pay my rent and buy some ramen noodles, I was free. And I loved that because it allowed me to pursue what I wanted to be pursuing.

I don’t know. I’m older now. And I kind of got sucked into the system a little bit. I am a little worried about the healthcare question. I haven’t really solved that for myself. If I quit my job—like I have great healthcare where I work. If I quit my job, what would that exactly look like? Do I have enough money put aside? I don’t know! I’m having those struggles which I think are pretty common.

Mad Fientist: How about identity? Do you worry about that? You have a prestigious job in Hollywood. You’re a big shot exec. Could you go to being an independent documentarian? And how would that feel? I’m sure you’ve thought about that. I know we’ve talked about it a little bit as well.

Travis: The identity question is huge for me because I’ve spent my entire life trying to build a career in the entertainment industry. And so it wasn’t like I had a bad job that I was stuck in a cubicle slogging away and just dreaming about the moment I could break the chains. I kind of got to where I wanted to go in many ways. So, I’m very fortunate on that regard.

And just throwing that identity out the window is kind of a weird thing.

I toy around with it. I’m not a famous actor. I’m not Brad Pitt. So I don’t walk out into the airport and people recognize me. I spent a lot of time in Alaska, for instance, working for one of my TV shows, and nobody cares about who I am. I mean nobody really cares about who I am in Hollywood either, to be real. I’m part of the working class of Hollywood. I’m part of the maker class. I’m not a celebrity. So my identity isn’t around that. It’s around what do I do all day. And will I still have the same level of access?

Mad Fientist: So, with your current work—you get to work in these remote Alaskan communities, there has to be some sort of similarities there between these two groups of people who—you know, one chose to go out on their own into the wilderness of financial independence, and then other people decided to go do that up in Alaska or something. So, have you noticed any similarities between these groups after working with them for so long?

Travis: Absolutely! One of the things that is a common denominator in all of my career that I’ve kind of noticed is that the subcultures that I’ve showcased and attracted to are people who seek great freedom. And the Alaskans are the prototypical freedom-seekers. “Last frontier… I don’t want no government… I can do this on my own… Get out of my way.” That’s Alaska.

And there’s a similarity to the FIRE community as we’ve discussed in terms of their desire for freedom and an autonomy.

Mad Fientist: So, what is the plan for the documentary then? I know you’re finishing up some edits. You’re hoping to get a trailer out soon. But what’s the timeframe? And what can people look forward to?

Travis: So, the plan right now is we’re launching our world premiere trailer at FinCon this month.

Mad Fientist: Can’t wait!

Travis: Along with our Kickstarter campaign to raise money to finish the film. I blatantly ask people to please support the film. Making a movie is extremely expensive. We’ve shot over the course of the year. The edit schedule is about four months. There’s all these stuff that we have to do in terms of coloring and mixing and paying a composer and things like that. So, we’re asking the community for their support with their Kickstarter.

And then, the plan from there—and this is a little bit of a trouble with documentaries generally—we’re going to be presenting for sale. We’re submitting it for the Sundance Film Festival. We may do a layer of direct sales to the community first in order to drum up enough interest and excitement from Netflix and people like that to purchase the film. The path for documentaries is you’ve kind of have to hit it from all angles and hope that something sticks.

So, the current plan is definitely to try to release it at least direct to the public by early 2019, probably January—unless we get into Sundance which would happen at the end of January, beginning of February. And that would change a big part of the way that the film gets seen.

Mad Fientist: Oh, that’s so exciting. And yeah, the Kickstarter, I’ll link to that in the shownotes. And I’m chatting with Scott right now to figure out something cool that I can donate to be one of the Kickstarter levels or whatever, however it works.

Travis: Oh, that would be awesome.

Mad Fientist: Cool bundle stuff, we’re working on that now. And hopefully, I’m sure there’s going to be tons of really cool things for any backers of the Kickstarter campaign. And yeah, I’m just super excited about it. I’ve never taken part in anything like that before. But just the production and all the guys you had on the crew, it was such a pleasure.

And I’ve seen some stills from the shots. And it just looks fantastic! So I have no doubt yours are…

Travis: And yours are great. You did a great job! You’re in a movie, Brandon!

Mad Fientist: Oh, man! That’s crazy. Thanks. Yeah! It was a nuts experience. It was great. And yeah, definitely, I’m used to being the radio voice—that’s easy—not being on camera. But no, I know you guys are going to make an incredible film. And I can’t wait to see the trailer in a few weeks.

Travis: The scene with you and Scott and Taylor is so great.

Mad Fientist: Is it?

Travis: Oh, my God! It’s so funny. It’s really wonderful.

Mad Fientist: Oh, nice. I can’t wait to see it. No, it was so fun to do. And yeah, I can’t thank you enough for asking me to be a part of it. And it’s been an amazing thing to see over the years, this thing go from your little idea that was in an email way back in 2016. And now it’s going to be a film. So congratulations!

Travis: Thank you. And I’m really grateful for your support and your participation and everybody else’s that participated in the community. I mean one of the things that I’ve always marveled at with this community is their generosity—of time, of spirit, knowledge. I mean it’s really incredible. It’s very rare.

Mad Fientist: Well, we appreciate you giving us a megaphone. It’s one thing to put something on a website on the Internet, but it’s another thing to make a movie out of it. And I think the reach from your movie is going to be incredible. So yeah, I appreciate the megaphone and the platform to do something hopefully great.

And yeah, like we said, if we get those 10%, that would maybe change the look of the country forever… which should be insane.

So, yeah, very exciting! 2019 is going to be a very cool year.

Before I let you go though, I ask all my guests: “What’s one piece of advice you’d give to somebody on the path to financial independence?” I can’t wait to hear what you have to say.

Travis: Oh, wow!

Mad Fientist: No pressure.

Travis: Okay. Let me think about that. What’s one thing that I would tell people.

Okay, I’m going to tell you the trick, the psychological trick, that was actually a mistake that I did that accelerated my savings rate more than anything else in my path. And that was that whenever I got a raise, I paid myself 10% of the raise based on the rule that I think I read in The Richest Man in Babylon, to pay yourself first 10%. I got it all backwards. I thought that it meant that I was supposed to take 10% of my raise and give it to myself and save the other 90% in the bank.

And this is how bad at math I am and why I shouldn’t really be talking about this stuff. But it worked perfectly. It gave me this boost where I was like, “Ooh, I got extra money. I can spend this on whatever I want,” but I was saving 90% of every piece of future income. And that had a massive effect on my savings rate.

Mad Fientist: And yeah, you get the benefit of the rate, you get the boost. And yet you’re able to reach FI in eight to ten years probably. So yeah, that’s…

Travis: Absolutely!

Mad Fientist: That’s one math problem that you should be happy you got wrong I think.

Travis: I am actually. I’m very happy. I feel stupid about it even still talking about it. But it worked in my favor, so sometimes being dumb is a great thing.

Mad Fientist: Well, this has been great, Travis. It’s always fun to talk to you. And yeah, I’m looking forward to seeing you in Orlando soon. And I can’t wait to see the trailer.

So, if anybody wants to find you anywhere, they can obviously leave comments on the shownotes for this episode. But is there anywhere else you want people to stop by?

Travis: Yes, so the film’s website is I’m also putting out my own website, if people want to contact me directly. But you can also get a hold of me through the Playing with FIRE website.

Mad Fientist: Perfect! I will link to all that and definitely the Kickstarter too. So if you guys are excited about the documentary as I am, definitely go to that. And check out all the backer levels and help make this thing become a reality.

But Travis, thank you so much. This has been great.

Travis: Thanks, Brandon.

Mad Fientist: Alright, buddy. Bye.

Travis: Bye.

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The Incredible Tax Benefits of Real Estate Investing Fri, 14 Sep 2018 10:50:40 +0000 Professional real estate investor Chad Carson breaks down the 10 best tax benefits of real estate and explains how they can help you retire earlier!

The post The Incredible Tax Benefits of Real Estate Investing appeared first on Mad Fientist.

Today, I’m excited to share a guest post with you that was written by Chad Carson from

This is a post I’ve been wanting to write for years but since I’m not a real estate investor, I didn’t have the knowledge or experience to do it.

Luckily, Chad has both (he’s been a full-time real estate investor for nearly 15 years) and was kind enough to write the ridiculously informative post you’re about to read.

Side Note: Chad’s new book, Retire Early with Real Estate, was just released yesterday and it’s fantastic so go check it out!

A big thank you to Chad for taking the time to put this together and I hope you enjoy it as much as I did!

Take it away, Coach…

The Mad Fientist is well known for dissecting and explaining amazing strategies to avoid taxes and achieve financial independence earlier. Some of my favorites are:

Like the Mad Fientist, I love benefiting from tax laws to help me reach financial independence earlier. But instead of pretax retirement accounts and stock index funds, my primary focus has been on the tax benefits of real estate investing.

I’d like to share 10 specific benefits with you in the rest of this article (including updates from the Tax Cuts & Jobs Act enacted by the U.S. Congress in December 2017).

But first, a little background on me.

My Real Estate Investing Background

I’ve been a full-time real estate investor since 2003 soon after I graduated from college. But my foray into real estate was not an obvious choice.

When my NFL football dreams fell flat (I was a middle linebacker at Clemson University), I stumbled upon the idea of real estate investing while reading a book. With a Biology degree and German minor, I was basically qualified to tell you the species of trees at a house and translate them to German! But I loved the freedom of entrepreneurship and the challenge of learning something new.

So, a business partner and I dove into real estate investing in 2003 and never looked back.

Real Estate Business vs Investment

As fledgling real estate investors, we had two challenges. First, we had to use real estate to make a living. Second, we had to use real estate to build wealth so that we could achieve financial independence.

To make a living we got into the real estate business. We learned how to find and quickly resell deals for a profit. Sometimes we sold these in as-is condition to other investors (aka wholesaling). Other times we fixed them up and sold them to end-users (aka retailing).

To build wealth and retire early, we also began buying real estate investments. We wanted our investments to grow and fund our early retirement with regular, steady income. Luckily, real estate has many different strategies to do both of those very well.

Along the way, we bought and sold hundreds of properties. And today we still own 90 rental units in and around the small college town of Clemson, South Carolina.

I don’t tell you this because you need to replicate what I have done. The opposite is true. If you have a regular job to pay the bills, you can accomplish amazing financial results with just a few investment properties. And the real estate strategies I have used work very well in conjunction with other investment strategies like stock index fund investing as taught by the great JL Collins.

How to Make Money in Real Estate

Without profits, tax benefits are not relevant. So, let’s first look at how you make money in real estate investing.

Just remember that real estate is an I.D.E.A.L. investment:

  • Income: Regular cash flow from rents or interest payments. I consistently see unleveraged returns of 5-10% from this one method of making money. With reasonable leverage, it’s possible to see these returns jump to the 10-15% range or better.
  • Depreciation: A required accounting method that spreads the cost of an asset over multiple years (27.5 years for residential real estate). This paper expense can “shelter” or protect other income from taxes and reduce your tax bill. I’ll explain depreciation in more detail later.
  • Equity: If you borrow money to buy a rental property, your tenant essentially pays off the property for you. You use the rent to pay the mortgage, and each month the principal paydown (aka equity) gets bigger and bigger like a forced savings account.
  • Appreciation: Over the long-run real estate has gone up in value about the same rate as inflation (3-4%). This passive style of inflation helps, but active appreciation is even more profitable. Active appreciation happens when you force the value higher over a shorter period of time, like with a house remodel.
  • Leverage: Many investors use debt leverage to buy real estate. This means, for example, $100,000 can buy four properties at $25,000 down instead of just one property for $100,000. Leverage magnifies the profits mentioned above (and potentially the losses). Plus, interest on debt is deductible as a business expense.

Not every real estate deal has every one of these profit centers. And sometimes you have to give up one in order to get another.

For example, one time I purchased a mobile home on land. I paid cash (so no leverage and no equity growth). The mobile home itself went down in value like a car (negative appreciation). But the income was excellent. And the depreciation sheltered some of the income from taxes.

Another investment was a more expensive single family house in a great neighborhood. Initially, the net rent after expenses barely paid the mortgage (no income). But my equity built up quickly because the loan amortized quickly. And the property was in a great location likely to appreciate at or above the overall inflation rate.

Now you know the basic ways to make money. Let’s move on to 10 different tax benefits of investing in real estate.

Top 10 Tax Benefits of Real Estate Investing

The Top 10 Tax Benefits of Real Estate Investing

1. Depreciation Shelters Income From Tax

The IRS uses depreciation to acknowledge that an asset wears down over time. Somehow they discovered that residential real estate wears down in exactly 27.5 years (sarcasm intended). Other assets have different timelines.

Unlike other business expenses, depreciation is a paper loss. This means you don’t spend any money, yet you still get the expense. This expense can offset taxable income and save money on your tax bill.

Here is a basic example:

Scenario #1 (without depreciation expense):

$5,000 taxable rental income x 25% federal income tax rate = $1,250 taxes owed

Scenario #2 (with depreciation expense):

$5,000 rental income – $3,000 depreciation expense = $2,000 taxable rental income

$2,000 x 25% federal income tax rate = $500 taxes owed

Tax Savings = $1,250 – $500 = $750

The higher your tax rate, the more taxes you would save in this example.

Depreciation is not unique to real estate, but real estate investing uniquely benefits from depreciation. Why? Because the cost of real estate is so large and often purchased with debt.

A $200,000 building depreciated over 27.5 years provides tax shelter of $7,272 per year. If you had 3 rental properties, you’d shelter $21,816 of income from taxes and possibly* save $5,454 on your tax bill (at a 25% rate)!

There are also other nuances and details related to applying depreciation expenses. If you want to go deep and nerd out, Depreciation For Side-Hustlers by Jeremy at is a great place to start. And the IRS publication about Depreciation of Rental Property makes for excellent weekend reading with a craft beer.

Also keep in mind that what the IRS giveth, the IRS taketh away. When you sell a rental property, it’s very likely that you’ll have to recapture the depreciation and pay taxes on it. The tax rate on this recaptured real estate depreciation is usually 25%. This creates a big incentive to keep real estate or to use other tax savings strategies when selling, like a 1031 exchange. I’ll discuss the 1031 exchange later in the article.

*There are catches to how much you can depreciate. I’ll cover those in the next section.

The Catch to Depreciation

Prior to the Tax Reform Act of 1986 real estate investors took full advantage of depreciation and real estate losses to shelter other sources of income. This was so popular that many high-earning investors bought real estate simply for its tax advantages.

Eventually, president Reagan, congress, and the IRS caught on. So, the rules changed (this is a good lesson to not depend upon beneficial tax rules forever).

To summarize the changes, depreciation expense on a rental property was and is still deductible against other passive income. But let’s say there is an excess loss. For example, your rental income is $3,000, depreciation expense is $5,000, resulting in a $2,000 rental (passive) loss.

Can that $2,000 loss shelter other nonpassive income, like your dividends or job income? After the tax reform, usually no.

But there are exceptions:

  1. $25,000 exemption – You can deduct up to $25,000 of passive rental loss against nonpassive income if your income (MAGI to be exact) is below $100,000 and you actively participate with your rental.
  2. Real estate professional – You can deduct ALL of the passive rental loss against nonpassive income if you or a spouse qualify as a real estate professional (here are the standards).
  3. Year of sale – You can deduct ALL of the passive rental loss (even from past years) against nonpassive income the year you sell the rental property.

So, you’re good up to $25,000 of deductions if your income is below $100,000 and if you’re active with your rental. Many early retirees accomplish this anyway to benefit from other tax angles like Obamacare subsidies and Roth IRA conversion ladders.

You’re also very good if you’re a real estate professional. But among other things, the rules require you to spend 750 hours or more with your real estate activities. Sort of defeats the purpose of retirement, doesn’t it?

The third exception means you get to eventually use your passive losses when you sell. These losses can be used to offset depreciation recapture and capital gains from the sale. This is not as good as immediate deductions, but it’s a decent consolation.

Some of the other tax benefits of real estate are more straight forward.

2. Avoid FICA (Payroll) Tax on Rental Income

Just like dividends and interest income, rental income is not subject to social security and medicare taxes (aka FICA). While this is not an enormous benefit when compared to other investments, it is significant when compared to normal earned income.

If you earn money at a normal salaried job, you pay 7.65% (as of 2018) of your salary in FICA taxes. If you’re self-employed, you pay 15.3% towards FICA tax.

With a $100,000 salary, that’s $7,650 or $15,300 out of pocket from your salary. But if you earn $100,000 in rental income, you avoid the tax completely. This is a big incentive to start earning your money from rental income.

3. No Tax On Appreciation (aka Buy & Hold Like Buffett)

One of the most tax-efficient methods to build wealth is simply not selling. Warren Buffett often says “my favorite holding period is forever.”

When you sell, you pay transaction fees, commissions, and taxes. All of these costs drag down your long-term performance because you forever lose the ability for those dollars to compound and grow.

And real estate appreciation doesn’t get taxed by the IRS. So, if you buy and hold for many years it’s possible to let your net worth grow with minimal tax exposure.

And when you do choose to sell, real estate has other benefits.

4. Capital Gains Tax at Lower Rates

As of 2018, long-term capital gains tax rates are between 0% to 20%, depending upon your tax bracket. Of course, the shifting political climate can always change these rates. But in general capital gains tax rates are lower than ordinary income tax rates.

Low capital gains rates are an advantage if you build your long-term investment strategy around strategically selling real estate for growth or living expenses.

For example, one year my deductions and rental depreciation placed me into the second lowest tax bracket. I happened to sell several properties that year, so my long-term capital gain tax rate was 0%!

But even in the higher brackets of 15% or 20%, capital gains tax would have been better than the equivalent income tax on ordinary income.

5. Live In Your Flip = No Taxes

What if you want to avoid capital gains tax altogether? Then just buy and immediately move into the house as your principle residence. As long as you live in the home 2 out of the next 5 years, in the U.S. you can make a tax-free profit of up to $250,000 as an individual or $500,000 as a couple. Canada and the U.K. have slightly different rules, but the principle is the same.

A real estate strategy called the Live-In Flip takes advantage of this generous tax exemption. Carl from wrote an awesome guest post for me explaining how several live-in flips built enormous wealth and accelerated his path to early retirement.

Keep in mind that this doesn’t have to be a permanent strategy. You could do 2 or 3 flips, reinvest the earnings, and move on to other investment strategies.

6. Exchange Properties For Tax-Free Growth

Another way to avoid capital gains tax (and also depreciation recapture tax) is a section 1031 tax-free exchange. This technique is named after section 1031 of the U.S. tax code.

A 1031 exchange allows you to trade one property for another without paying taxes. You must follow specific rules, and you must be classified as an investor (i.e. not a dealer who flips houses).

Why is this helpful? Because you get to use 100% of the profits from the sale to reinvest in the next property. This maximizes the growth and compounding of your investments.

For example, let’s say you sell a property for $300,000 without a 1031 exchange and pay $35,000 in capital gain and depreciation recapture taxes. By avoiding these taxes using a 1031 exchange, you would keep that $35,000 invested. At 10% for the next 20 years, that $35,000 would grow to over $235,000!

I am currently doing my first 1031 exchange. The technical side of the process has been relatively straightforward because I hired a third party “qualified intermediary” to handle it for me. The most difficult part has been finding a good replacement property in time, but fortunately, I do have one under contract.

Perhaps a future post can spill all of the details!

**UPDATE** The Tax Cut & Jobs Act of 2017 did retain the use of 1031 Tax-Free Exchanges. But there was one negative change for exchangers. Now only real property (the real estate building and land) can be exchanged. Any personal property (appliances, furniture, etc) can not be exchanged. For large apartment complexes with furnished apartments, this could mean significant taxes paid on a transaction.

7. Installment Sales For Income & Deferred Taxes

The IRS gives property investors another tool to reduce taxes on the sale of real estate. This tool is called an installment sale (aka seller financing or seller carry-back mortgage).

Like 1031 exchanges, installment sales are only available to property investors and not to dealers (house flippers). Also like 1031 exchanges, installment sales allow an investor to defer capital gains tax, but unfortunately the entire amount of accumulated depreciation must be recaptured at the initial time of sale.

From a practical standpoint, an installment sale just means the seller of an investment property receives the sales price over time. The seller is essentially extending credit to the buyer instead of the buyer getting a bank loan (here is my visual explanation on YouTube).

For example, a duplex owner could sell me her property for $300,000. $30,000 could be a down payment, and I would still owe $270,000 in the form of a seller financing mortgage. The terms of the financing might be $1,934 per month at 6% for 20 years.

This arrangement would be most beneficial if the duplex owner owned the property for a long time and experienced a huge run-up in prices. For example, my duplex owner might have bought the property for $50,000 over 30 years ago.

An installment sale would allow this owner to only pay taxes on the profits received each year. A $250,000 gain at one time would have pushed the seller into higher tax brackets. But the installment sale allows the seller to slowly receive the gains and possibly stay in lower, more favorable tax brackets.

It’s also worth mentioning that installment sales can be a great way to transition out of active property management and into a period of more passive income. I have done this on many properties myself.

8. Borrow Tax-Free Instead of Sell

To raise cash most investors consider selling investments. As I’ve shown above, this exposes you to taxes or complicated procedures to avoid tax. But with real estate you have another choice. You can simply pull capital out of an investment tax-free by refinancing.

This is exactly what I plan to do to help fund my two daughters’ college educations. I shared all of the gory details with spreadsheets and graphs at How to Pay For College With Real Estate Investing.

In the end when I need money, I am leaning towards refinancing the properties instead of selling. This has a few benefits, including:

  • Get to keep a well-performing property that I know very well
  • Benefit from future loan amortization as my tenants pay it off again
  • Benefit from future appreciation of rents and property price
  • NO tax paid on the cash from the refinance because it’s borrowed

You’d be right to say this technique increases my risk by incurring new debt. But as long as the debt is attractive (fixed interest, low rate, long amortization) and covered conservatively with cash flow and cash reserves, this is a risk I am personally very comfortable with given the benefits.

9. Self-Directed IRA Real Estate Investing

IRAs and 401k style retirement plans are incredible tools to build wealth while minimizing taxes. But most people think of them only as tools to invest in traditional investments like stocks, bonds, mutual funds, and REITs. While this is the norm, it’s not the rule.

The IRS does not describe what your IRA account can invest in. It only describes what you can NOT invest in. The “do not invest list” includes life insurance and collectibles like artwork, rugs, and antiques. Non-traditional investments like real estate, private mortgages, limited partnerships, and tax liens are therefore allowed. But most larger retirement account custodians (i.e. Vanguard, Schwab, etc) do not choose to offer them as a possibility.

So, there is an entire industry of specialized custodians who do allow investments in these non-traditional assets. A google search will give you dozens of possibilities. I personally use a company called American IRA .

While self-directed IRAs are a wonderful tool, there are many pitfalls and strict rules to be careful of. For example, you can’t self-deal by loaning money to yourself or to another disqualified person, like a close family member. If you break one of the rules, you could face large penalties and disqualification of your account from tax-free status.

My favorite way to invest with my IRA is a loan against real estate. It’s lower risk and has fewer moving parts than actually owning the real estate itself. I have also purchased local property tax liens, which often pay high interest rates and even sometimes get you a deed to real estate for pennies on the dollar.

10. Die With Real Estate (Seriously)

This may sound like a joke, but one of the best plans (at least as a tax strategy!) is to die with your real estate. Instead of facing the tax issues of recaptured depreciation or capital gains tax, your heirs instead get a stepped-up basis.

For example, let’s say you bought a rental house for $100,000. Forty years later you die and the house is worth $500,000. When your heirs sell the house, they would not pay capital gains tax on the $400,000 gain. Instead, their basis would be $500,000, which means they could sell it for $500,000 and have no capital gains tax to pay.

Keep in mind that inherited assets are still subject to estate taxes. But as of this writing (2018) $11.18 million of assets are exempt from any estate taxes. So, your heirs would inherit a lot of property before paying any taxes.

Of course, you don’t have to let the tail wag the dog. Tax benefits are only part of the overall equation of finances in your life. You may have plenty of legitimate reasons (like enjoyment of life!) to pay taxes and spend the money before you die. You could also contribute a portion of your assets to charity, still pay no taxes, and help decide how worthwhile causes will benefit from your wealth while you’re alive.

Real Estate Investors Benefit From the New Tax Law

Now let me cover the highlights of how the Tax Cuts & Job Acts of 2017 affected real estate investing.

After the recent U.S. tax law change, real estate investors retained almost all of the existing benefits already explained in this article. But there were some changes to pay attention to. Most will make real estate investing even more beneficial tax-wise. But a couple may negatively affect investors in certain situations.

I’ll describe the highlights of these changes below. But if you have a lot of time and enjoy punishing your brain, knock yourself out with the entire new tax law.

Personal Income Tax Rates Decrease

Most real estate investors own property personally or in an LLC (Limited Liability Corporation). Because in both instances taxes are paid on a personal (not corporate) level, the new tax law was a win with its reduced personal tax rates. Here are the new tax brackets for single and joint tax filers as of 2018:

Single Filers

Tax rate Taxable income bracket Tax owed
10% $0 to $9,525 10% of taxable income
12% $9,526 to $38,700 $952.50 plus 12% of the amount over $9,525
22% $38,701 to $82,500 $4,453.50 plus 22% of the amount over $38,700
24% $82,501 to $157,500 $14,089.50 plus 24% of the amount over $82,500
32% $157,501 to $200,000 $32,089.50 plus 32% of the amount over $157,500
35% $200,001 to $500,000 $45,689.50 plus 35% of the amount over $200,000
37% $500,001 or more $150,689.50 plus 37% of the amount over $500,000

Married Filing Jointly

Tax rate Taxable income bracket Tax owed
10% $0 to $19,050 10% of taxable income
12% $19,051 to $77,400 $1,905 plus 12% of the amount over $19,050
22% $77,401 to $165,000 $8,907 plus 22% of the amount over $77,400
24% $165,001 to $315,000 $28,179 plus 24% of the amount over $165,000
32% $315,001 to $400,000 $64,179 plus 32% of the amount over $315,000
35% $400,001 to $600,000 $91,379 plus 35% of the amount over $400,000
37% $600,001 or more $161,379 plus 37% of the amount over $600,000

Limited Itemized Deductions (Bad For High Cost Areas)

Both property taxes and mortgage interest deductions are now limited for a primary residence. But rental property taxes and mortgage interest ARE still deductible. So, this change only negatively affects owners of a primary residence in high-cost areas, like someone doing a live-in flip in San Francisco.

Mortgage interest is now only deductible on the first $750,000 of acquisition financing on primary and secondary residences. If you previously purchased a residence, a grandfather clause will allow you to continue deducting the interest on up to $1,000,000 of debt.

And state and local taxes are now limited to a total $10,000 deduction. This means, for example, that even if your total state income and property taxes (for your residence) are $20,000, you can only deduct $10,000.

20% Pass-Through Deductions (Section 199A)

Perhaps the biggest new tax-break for small businesses is the 20% pass-through deduction (explained in section 199A of the new tax law). The Mad Fientist literally got the guy who wrote the book on this tax break to write an awesome guest post. I can’t hope to improve on what he already said, so I’ll be brief here.

In summary, the pass-through deduction represents a 20% reduction in taxes on your business income if you qualify! That’s huge!

But will real estate investors qualify? As far as I can tell, the answer is murky. People who flip houses should be fine. But rental property investors will need to qualify as a “trade or business,” meaning you have to engage in your business with “regularity and continuity.”

What does that mean? Even tax professionals argue about it.

But on one extreme, a very passive commercial landlord who simply collects net-lease rent checks from a Walgreens does not seem to pass the test. And on the other extreme, an Airbnb host who actively moves people in and out does seem to qualify.

Landlords in between are in the grey area.

So, I recommend you work closely with a tax professional and keep an eye on updated IRS regulations if you plan to use this deduction as a real estate investor. It could be profitable, but you need to have a good defense for your position.

Increased Depreciation (Personal Property Only)

The new tax law made it easier to quickly depreciate personal property (i.e. save more on current taxes). This means your purchase of rental property equipment like carpet (unless it’s glued down), refrigerators, stoves, washers, dryers, and other non-attached property can often be 100% depreciated in the first year. You can also quickly depreciate computers and other eligible office equipment used for rentals or other business.

Creative investors and their tax professionals may also use cost segregation (ie. splitting up the basis of a rental into separate components) to also write off land improvements. This means things like sidewalks, driveways, and landscaping which could be depreciated more quickly.

But this area of tax law is another tricky one. Tread carefully and get professional tax help.

And if you read tortuous (yet sometimes humorous) tax articles for fun (Mad Fientist, GoCurryCracker, and I are raising our hands, anyone else?), then have fun reading my favorite tax geek in this Forbes article Changes to Depreciation in the Tax Law.

Opportunity Zones

A new concept called an “Opportunity Zone” is perhaps the most innovative and profitable tax law change for real estate investors who can take advantage of it.

To benefit from the change, you must invest in certain areas of the country that are designated as Opportunity Zones. These zones are typically economically-distressed areas (national map of all economic zones).

The vehicle for this investment is called an Opportunity Fund, which is just any partnership or corporation that self-certifies that it is an Opportunity Fund (i.e. you just fill out an IRS form).

How exactly do real estate investors benefit? Here’s an explanation of three primary ways that I learned from the Economic Innovation Group, who has followed the rollout of opportunity zones closely:

1. A temporary deferral of capital gains taxes if funds are invested in an Opportunity Fund. You eventually pay taxes on the deferred gain either when the opportunity zone investment is sold or December 31, 2026, whichever is earlier.

For example, you could sell $200,000 of appreciated stock (i.e. a basis of $100,000), reinvest in an opportunity fund, and pay no taxes on your $100,000 of gain until the fund’s property is sold or December 31st, 2026.

That’s years of tax-free compounding!

2. A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.

So, in addition to the deferral of tax in #1, you get a reduction of your original taxable gain by holding onto the investment for 5 to 7 years or more.

3. A permanent exclusion of your taxable capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.

For example, if you bought an Opportunity Zone property for $200,000 and sold it more than 10 years later for $500,000, you’d pay zero tax on $300,000 of new capital gain!

As you can see, this is an incredibly generous tax benefit. But it’s such a new provision that the method of implementation and long-term effects are unknown.

I plan to keep a close eye on it, so perhaps the Mad Fientist and I can brew up a future article to keep you updated!


As you have seen, tax benefits are a compelling reason to get involved in real estate. But tax benefits are never the sole reason to invest in real estate or anything else. Basic economics and quality of your investments are primary factors to consider when choosing your strategy.

And you also need to make sure real estate fits your lifestyle. I think real estate is often overlooked as a viable retirement strategy, especially by early retirees. But it’s clearly not for everyone. Do your homework and figure out what’s best for you.

And if you choose to invest in real estate, be sure to build a team of professionals to support you. One of the most important team members will be a tax professional like a CPA or qualified tax attorney. All of the strategies I’ve mentioned here are a start, but a professional can help you apply the details to your situation.

What do you think? Have you benefited from investing in real estate? What tax angles have been most beneficial to you? Did I leave any out?

Hey, it’s the Mad Fientist again.

That was amazing, wasn’t it?

If this post got you excited about real estate and you’re interested in learning how you can use real estate to retire early, Chad just published a book that dives into exactly that topic – Retire Early with Real Estate!

I’ve also interviewed Chad twice for the Financial Independence Podcast so check out this episode to hear more about Chad’s personal story and real-estate investing experience and listen to this episode to discover some of the best real-estate-investing strategies you can use on your journey to financial independence!

Finally, make sure you head over to his site to say hello and to check out all the great stuff he’s got going on over there!

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Chad Carson – Retire Early with Real Estate Fri, 31 Aug 2018 08:01:35 +0000 Chad Carson joins me again on the Financial Independence Podcast to talk about the best strategies you can use to retire early with real estate!

The post Chad Carson – Retire Early with Real Estate appeared first on Mad Fientist.

Chad Carson from joins me again on the Financial Independence Podcast to talk about the various strategies you can use to Retire Early with Real Estate!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • The best real-estate strategies to use to reach financial independence and retire early
  • How real estate can be a good investment while also enhancing your lifestyle
  • What is the Mad Fientist’s Peak Arbitrage™ strategy and is it a good idea
  • Why you should buy utility but rent luxury
  • Thoughts on internet-based real estate investing companies (e.g. PeerStreet, RealityShares, etc.)
  • What you should look for when buying a long-term “Buy and Hold” rental

Show Links

Full Transcript

Mad Fientist: Hey, welcome everyone to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence.

On today’s show, I’m excited to welcome back Chad Carson from Chad was on the show a few years ago to talk about real estate. And he has since released a book that’s compiled all of the various strategies that you can use to retire early with real estate. He shared an advanced copy with me. And I really enjoyed it. It’s actually got me super fired up about real estate again which I was sort of sad about at first, which I talk about in the episode, but now I’m actually really excited about.

I just wanted to get him on to talk about all these various strategies. And he did a lot of interviews in the book about people who actually used these strategies to retire early. So I wanted to dive into some of those stories. And I wanted to get his opinion on a strategy that I’ve been personally thinking about utilizing. It’s something that came up with myself. And I don’t know if it’s actually a thing or if it’s a good idea. So I wanted to get him on to talk about that as well.

Without further delay, Chad, thanks a lot for being here. I really appreciate it.

Chad Carson: Man, it’s awesome to be here. Thanks for having me.

Mad Fientist: So, the last time I spoke to you. You pretty much just landed in Ecuador to start a year in South America with your wife and two kids, right?

Chad Carson: That’s correct, yeah.

Mad Fientist: And now, where are you?

Chad Carson: So, we just go back a couple of months ago. The trip lasted about 17 months. And we had just an amazing time. We made it back to South Carolina (Clemson, South Carolina), a little college town where my home is. We had tenants in our home for two years. So we had to wait a little bit until they moved out.

But looking back over the whole experience, I still pinch myself that it worked out so well and we had such an amazing experience in so many different ways, just to be able to take off and put things on pause and leave. It was awesome.

Mad Fientist: That’s amazing. That’s great. And it was cool that I get to see you down there. We met up at the Chautaqua and had some Ecuadorian fun together which was nice.

Chad Carson: For sure… you didn’t have any guinea pig though, did you?

Mad Fientist: No, I didn’t. Did you?

Chad Carson: I did, yeah.

Mad Fientist: How was it?

Chad Carson: Well, it’s okay. It put the new understanding on baby back ribs when I was eating one of these things. Just picture I can barely fit this little rib in my hand. And you’re gnawing on it, like something from Dumb & Dumber.

But it was good. I mean I wouldn’t have it every day, but getting to try it out—every taxi driver we talked to in Ecuador is like, “Oh, yeah! Que bueno necesito probar.” They’re like, “You got to try this guinea pig. It’s amazing.” So we had to do it.

Mad Fientist: Yeah, I didn’t get to do that. But when we were walking around Otavalo or something, we got some fried bugs, lots of fried bugs. We had some of those. They weren’t too bad. They just tasted like fried anything really.

Chad Carson: Yeah, you put it down with some beer, it always works out.

Mad Fientist: Exactly. So that’s great. I’m so glad it went well. Did you say 17 months? That’s quite the time to be away and especially just somewhere in South America.
Chad Carson: Yeah, we were planning on 12 months. And the best part of early retirement and financial independence, some of the benefits, we were there, things were going well, and we said, “Yeah, let’s extend this trip. We don’t have any reason specifically to come back.”

One of the main reasons we went was we had all sorts of experiences that were positive. But our daughters were in local schools. They were really doing well and had friends. They were speaking Spanish fluently. They were correcting me. I’ve since been speaking Spanish not great, but I’ve been speaking it longer than they have. And my wife is fluent and teaches Spanish. They would come home, and we would speak Spanish around the dinner table. And they say, “Papa, [foreign language 03:44].” They’d wag their finger at me, correct me. They’re like, “Oh, my gosh! My little kids are correcting my Spanish. This is awesome!”

Mad Fientist: That’s amazing! So did you have tenants locked in for two years or was that something where they got to the one year and you’re like, “Hey, do you want to stay another year?”

Chad Carson: Yeah, they were there for two years. And they actually emailed me early before we came back and said, “Hey, we would really like to stay another year.” And we were so tempted just to keep going. We were sort of torn between coming back. We had family and grandparents wanting to know we were still alive and wanted to see their grandkids.

But I think it definitely ignited the itch to do this again. I don’t know when it’s going to be. We’re going to settle down for another year here. And they’re going to a local American elementary school this year. But there’s no doubt that experiencing the flexibility and the ability to travel and see new places and still have income coming in back at home, it made me realize this is possible. We’re already sort of thinking about what’s next. and

Mad Fientist: That’s very cool. And how did it go renting out your house? I know a lot of people are probably in the same situation as you were, and you’re thinking, “Oh, it’s going to be great to just go and take our family away for a year.” But a lot of people would probably worry about their houses getting trashed or something like that. How did renting out your primary residence go?

Chad Carson: Yeah. I mean it went really well. I had the benefit of being in the rental business. So I had a little bit of experience screening tenants. But we found a couple who had a young kid. He’s a professor at Clemson at the local university. And they had a little business they started the year before. So they were super busy, but they were awesome. They were early on their rent payment every month. They did improvements to the house. There was a few, little things. They weren’t as much yard people as we are. So we had a jungle in our backyard when we came home. But other than that, it was great.

I mean, home ownership, for a lot of people, is not their thing. Renting keeps you flexible. But I would encourage people who are homeowners who think that it’s an anchor and it’s going to hold you down. Being able to rent your home and have that flexibility is very doable. And it worked great for us and effective. It funded. We made a profit. We were probably like +$500 a month in our house. In Ecuador, that covered our grocery. Not only it sustained itself, but it enabled the trip even more.

Mad Fientist: That’s amazing. That’s really cool. And I’m definitely going to just talk to you more about using your primary residence and renting it out because I think that’s the only way that I’ll ever buy a house again, is if I buy it first with rental in mind. I want a decent investment. And it doesn’t actually tie us down because it could be rentable. So we’ll dive into that.

But before we do, I want to get into what the state of your real estate business is now. I think the last time we talked to you, you had something like 90 units and things were going great. But now, you just spent 17 months in South America. So how did that play out?

Chad Carson: Yeah, there was a couple of things. I mean we’re about the same level. We’re about to sell one property. And so we’re sort of whittling it down a little bit. But the number of units, we basically pressed pause on the growth. We didn’t try to grow. We didn’t try to do much. We just sort of kept steady while we were there.

But one of the big challenges, the thing that we worked on pretty hard before we left was having a lot of systems in place and having people on the ground who could help me. It worked before I left, but you never know until you just leave the country and say, “Alright!” I have people who are managing my properties. “You’re on your own. You can text me here and there. But I’m in another country.” And it worked really well—I think better than my expectations.

And so, I think it confirmed for me having—we had a couple of different structures, different systems for how people manage our properties. We had a third-party manager. There’s a company, a local company who manage part of them. And then, we had a person who’s worked with us for a long time. It started as a bookkeeper, and then she grew into an administrator and kind of helps us manage properties now. Between her and a handyman who’s really a good handyman, they handled 95% or more of day-to-day activity.

And then, every week, my routine while I was in Ecuador was she would upload the bills that we owed, that the contractor came out, or whatever. She would scan them in Evernote, so I could go look at what the bill was. And then, I would go online to the bill pay for my bank and just send them a check.

So, it could take me sometimes 20 to 30 minutes, sometimes an hour or an hour and a half depending on how much there was and how much bookkeeping I needed to do. But it allowed me to stay involved a little bit. I would do it for an hour, and then go take a Spanish lesson or go drink a beer and do something else.

Mad Fientist: That’s amazing. So, for people out there who already do have a real estate portfolio and were thinking about doing something similar, the key people in your mind to hire would be a general handyman, and then someone to do admin? Or have you used full service management companies in the past? And would you recommend them?

What would be your main focus knowing now what you know after being 17 months down to South America?

Chad Carson: Right! I would say, for most people out there, hiring a third-party management company who has a lot of those functions built in already is the best way to go. I’m a little bit of an exception because I started off building my own management business and we have enough units where it makes sense to have some of our own people working with us a lot.

So, I would say 99% of people, hire a management company yourself. They’re going to have a handyman. They’re going to have a plumber. They’re going to have an electrician. They’re going to take the maintenance calls in the middle of the night. You’ll never have to mess with any of that stuff. And you can just be sort of the person who’s managing the manager, getting financial reports, asking them questions. I think that’s the best way to go for most of us.

But there are other people who are a little bit more hands-on. And so you’d be more like what I have done. And in that case, one of the most important things in addition to having sort of a bookkeeper or somebody who’s going to help you collect rent and do some of those functions is having a list of good repair contractors. That’s the big deal.

If somebody has an issue on a Saturday, their toilet is leaking, and water’s going on the floor, you just want to be able to call and text that handyman, and then be able to go out to the house, take care of it, send you some pictures and have trust that they’re going to actually follow through and do it right.

Mad Fientist: So, you weren’t too busy managing your own 90 rentals, it sounds like. So you had time to write a book, which—big congratulations—you sent me an advanced copy. And I loved it! So it’s great. It’s Retire Early with Real Estate. It’s through Bigger Pockets. It’s fantastic.

So, yeah, how was that process?

Chad Carson: It was laborious. I can’t lie. The actual writing of it became tedious a little bit. But I love the topic. And I’m so passionate about retiring early and the financial independence community. And what I really wanted to do was sort of combine two communities that I’m a big part of.

The real estate investing, Bigger Pockets, how to use a few rental properties to build wealth and create income is something I’ve done for a long time obviously. And then I’m super passionate about a lot of the things you talk about in your podcast and a lot of the community of not knowing when you’ve hit enough money and enjoying your life and focusing on happiness. And doing what matters is sort of the theme of the whole book.

So, it was just fun combining those two ideas. The idea is that be a strategy guide, almost like you’re climbing a mountain and financial independence is at the top. But then, along the way, there’s a bunch of plateaus like what I’ve done with mini-retirements and semi-retirement. And I try to show how the main routes up the mountain using real estate, what they are, and how you do them.

I got to interview 24 other early retirees who use real estate. And I sort of showed their numbers and how much income they need to live off of and how they did it with real estate. So I learned a ton getting outside my own box and learning how other people have done it and try to teach it to other people as well.

Mad Fientist: No, it was fantastic. I loved the case studies. It was always like a treat at the end of the chapter to hear about somebody who had put a particular strategy into practice.

And yeah, your site is called And it really felt like a playbook for using real estate to get to financial independence. Was that a conscious choice? It’s like all these different strategies, you give the pros and cons of each, and it really just felt like a playbook.

Chad Carson: Yeah, that’s funny you mentioned that. I had this old chalkboard in the house that I live in. Of all the features in the house, I didn’t look at the kitchen. I didn’t look at the bathroom. I was like, “There’s a chalkboard in the basement. Awesome!” For me, drawing plays on a chalkboard when I played football or somebody sitting beside me, and they’re drawing it up on the board and say, “Oh, this is how you could do it. You can buy that property. You can make sure all your expenses are covered, and then you have that much income,” that’s what I wanted it to feel like.

I really appreciate you saying that because I wanted it to be, “Okay, I’m a coach. I’m on your side. I’m that guy who cares about you, doing what matters in your life. Let me share some strategies that have worked really well for me and other people and hope they could help you.”

Mad Fientist: Yeah, no. It definitely came across like that. It was really enjoyable. It gave me a lot to think about.

And like I said, when I tweeted congratulations to you on Twitter, it made me want to potentially dive into real estate again. And I did have a negative attitude towards that in between, which you obviously picked up on and laughed at.

But it did! It got me really excited about it. I think I may be ready to dip my toes back in again after forgetting about the houses that I’ve bought in the past.

We’re a completely different scenario. Those were houses to live in. They weren’t investments. I wasn’t as smart back then. So yeah, all of my negativity towards real estate in the past is all of my own doing because they were my mistakes that I made.

So, you gave me a lot to think about. And I also recognize a lot of the people that you did case studies about which is exciting.

And one of the first ones I’d like to talk about actually is Liz from San Diego who we both met on Chautauqua. She’s been really big into something called PeerStreet which is, correct me if I’m wrong, it’s sort of like being a hard money lender on a grand scale. So rather than lending money to you, a real estate guy, who’s going to then do up a house and flip it, and then I would just collect interest from you, I think the way it works is I would just put in some money, and I could potentially be part of many deals.

The good thing about that is it’s sort of like lending club, and you’re lending money to people through the Internet and you’re collecting interest, except that it’s backed by real estate, and you’re the first lien holder.

Everything I said, is that correct?

Chad Carson: Exactly right, yeah. The cool thing about it, somebody with money and capital—

And that’s the disclaimer about some of these crowdfunding sites is what we’re talking about. You typically have to be an accredited investor. So you have to already be able to demonstrate that you have a million dollar net worth or you make $200,000 a year. I think those are the qualifications.

And so, for a lot of us, if you’re new in your real estate journey or new in your financial independence journey, it might be something that won’t be accessible to you right off the bat. That’s just the main point.

But as you grow and as you accumulate some capital, what Liz do just beautifully—she’s just the best example in my mind—she was a commercial lender in a regular job. That’s what she did every day, make loans to people.

And so the way that she explained it to me was “I already have the skill set, I like being the lender, I like being the person who funds the deal, and then let another entrepreneur go make the money, and they pay me interest.”

I should get used to that. It really is. I’ve done some lending now too. And I’m going to be doing more of that.

It’s a beautiful thing when you can just make interest and you have a secure investment. And for me, I like having real estate. So I don’t mind having my money secured by a piece of real estate.

And so, what she did with the crowdfunding platforms, the new innovation with them, is that it used to be “I have to have a hundred thousand bucks saved up,” and Brandon, if you wanted to go buy a property, I could then loan that money to you individually.

And that’s fine. If you can meet that person and I still think that’s a good viable strategy, but one of the issues with that is you have the risk of having one person, one property, you screw that up, you screw it up big time on one property, whereas some of these crowdfunding platforms, I think the best part about them is that I can take that same $100,000, and I could make potentially one hundred $1000 loans and basically pool up with other people.

So, I could have a hundred different properties. And so you get some of that diversification that we all know is important. I could even diversify over different states. I might say, “I want to have 25 loans in California, 25 loans on the East Coast, 25 loans in the south, 25 in the midwest.” You could sort of spread it out geographically which is really hard to do in real estate.

I think there are some challenges to those as well because they’re so new. They’re brand new. But I really am intrigued by the concept. And Liz demonstrates it beautifully that she put a big chunk of capital in PeerStreet, which is one of the better ones. And she had been living off interest at FI. Instead of her having to draw it down on some of her other capital and other accounts in more traditional accounts, she could just live off the interest and not touch any of the principal.

Mad Fientist: Yeah, no. It seems really interesting. And she’s a friend of both of ours now. And she was kind enough to share all her spreadsheets and all the analysis that went into it and how the returns had been coming in. It does look like a great way to go if you’re not wanting to go out there and try to find these individual lenders yourself.

So, obviously, you are a very active real estate investor, and you know you’ve built up your portfolio by working hard and hitting the ground and hitting the neighborhoods and things like that. Is that something you think you’d ever get into?

Chad Carson: Yeah, I’m already doing it. I’m sort of testing it out. I haven’t written about it on my blog yet because people listen to what I’m saying about real estate sometimes, and I just want to make sure I’m really doing it myself. And so I’m going to get ready to start writing some articles and share my experiences.

But so far, so good. I like the concept.

To me, the beautiful thing about lending your money—or not the beautiful thing, but the thing you should always keep in mind is that you want to make sure the collateral that you have is always the first thing you think about. In real estate, you either own the property or you own the loan, securing the property. And you can make money with either one. But the core of real estate always is that collateral, that piece of real estate.

And so, as long as you’re making loans, and you’re keeping that in mind—like one of the things I want to make sure, the discipline I want to make sure I do when I’m making loans is always stay below a certain loan-to-value.

Mad Fientist: And I believe it’s the max for PeerStreet. When I was just poking around, it looked like 75% was the max, was it?

Chad Carson: Correct. Yeah, I think that’s right. So you can make a choice though. It’s really cool. You can filter it out and say, “I don’t want to make any loans over a 65% loan-to-value. I don’t want to make any loans over 70%.” And you can sort. There’s a bunch of different criteria you can choose.

And so, playing around with those criteria, for all the analytical [folks] out there in our community, you could probably go back and look the success rates of past loans. And so I think that will be a key component over the next five to ten years in making sure—

Inevitably, we’re going to have another downturn, right? And so the security you have in a down real estate market is having some equity above and beyond the loan you made. That way, if you have to take a property back—which you will eventually, somebody is going to not pay you—you wouldn’t be panicked about that. You would say, “Alright, I’ve got some equity. I’m going to take it back, sell it,” and you want to take it back, PeerStreet or whoever the lender is, will take it back for you. But there will be some cost. You’ll have some margin to eat up those costs.

Mad Fientist: And being first lien holder, you would be first in line for getting the property. So you won’t be splitting that with anyone. If they stop paying their mortgage, then they default, and they foreclose, and then that property is owned by you, the investor?

Chad Carson: Correct. That’s the important part. First lien means you’re first in line. I would be very cautious about making second liens, second loans. I think there are some out there. But that’s a whole other ballgame.

Mad Fientist: That’s why lending clubs seems such a crazy idea to me, making loans to people that were secured by absolutely nothing. When I first heard of PeerStreet, I was like, “Oh…” I wasn’t too sure about them. And then, I heard that it was actually backed up by the actual property, and you would get it at the end of the day. That made me change my mind a little bit—which is good.

Chad Carson: Yeah. I’ll add one more thing about crowdfunding. I know that we’re kind of going down the rabbit hole. But I think it’s a cool rabbit hole. The innovation and the reason I said that we all have to be cautious about it—I’m not putting all my money in there. You want to still diversify—is because the technology and the legal contracts that attach your money to that property is something new. It hasn’t been tested a lot. And what I mean by that is when you own that $1000, you are basically buying a loan to PeerStreet or to an entity that PeerStreet controls and owns. And then, they are making a loan to the actual borrower.

And so, in their books and in their contracts and everything, it’s supposed to be connected. And more than likely, it is. But it’s just not tested. If one of these new companies went out of business, I’m not 100% convinced that in every case, the bankruptcy court, whatever happened if PeerStreet went out of business or whoever it was wouldn’t take the properties that you own, and they would be able to separate you from your loan.

I know it’s supposed to happen right, but I don’t know. It’s just new to me. And so I’m kind of pointing out the things that I’m cautious about and concerned about seeing. And I think we’ll know the next downturn when one of the technology companies goes out of business, we’ll see how that’s treated. But up until now, nobody really knows.

Mad Fientist: Oh, yeah, that’s great to point out. So thanks for that.

And just before we move on—because we’ve gone down some rabbit hole, but it is an interesting one—is PeerStreet a major player in this space? Or are there others that you’ve heard are bigger, better, more established?

Chad Carson: It’s one of the big ones. And I like the user interface with them. And they seem to be very transparent, which I like. So they’re one of the big ones I’m testing out. Realty shares is another one I’m testing out.

They’re a little bit different. They’re almost a different animal. They do some loans like Peer Street does. Peer street, 100%, I believe is just loans to borrowers and typically hard money loans like people flipping houses.

Realty shares is a little bit different where sometimes they do loans, but they’re more like commercial real estate. So you might be able to buy into a deal where you’re an equity partner in a big apartment complex. So that’s a little bit different. You could be the lender. You could be the owner.

The caution there, if you’re brand new to real estate, I think I’d be a little bit more nervous about that, going and having to analyze a real estate deal and know that you should be an equity partner on this deal. But for people who have a little bit more experience, it’s a really good way to get access to this big syndications and commercial real estate deals all over the country that you might not have access to otherwise.

In the past, it used to be like, “Oh, who do you know in this local town?” It was kind of an old man’s club who are able to control all of the deals. And whoever had money on Wall Street could kind of get into them. Whereas with Realty Shares—and there might be a couple of others that do that as well—they’re taking those deals and putting them out on a technology platform and allowing other people to get access to them at small, like $5000 or $10,000 increments.

Mad Fientist: Yeah, okay. That sounds interesting as well because, yeah, you may not have the capital to purchase a 40-unit apartment building, but a fraction of it may be a good return on investment.

Chad: Yeah.

Mad Fientist: No, it’s interesting. I’ll look forward to reading all your analysis on Coach Carson once you try all these things out because it’s exciting to…

Chad: It is.

Mad Fientist: It’s being democratized in a way. That was the first thing that sort of got me excited. I was like, “Ooh, maybe I could do that a little bit.” And then I got to the long-term buy-and-hold which has always been something that I thought would be really interesting to do. And I would love to have just a very small portfolio of buy-and-hold real estate, particularly in my home town in Pittsburgh because it just seems like such a good rental market. And I could see us maybe going back there one day. So it would be nice to maybe have a property to go back to.

And I don’t know, just for peace of mind. If the stock market just blew up, I would have nothing. But at least if I had a house, I could go live there. So, for a little bit of diversification.

So, in the book, you talked about what you look for. You mentioned like low maintenance construction when you’re looking for a long-term buy-and-hold. You mentioned things like solid surface floors, brick exteriors. And I was just wondering, is there anything else you look for, either in how it’s constructed or the type of house, like three bed, two baths, a certain square footage? Is there a sweet spot in your mind as far as what’s a good rental prospect?

Chad: Yes, it’s a really good question. I think there are two components there. There’s the actual building itself. We call that the sticks and the bricks. The sticks and the bricks are really important. And so you want to look at that. I’ll go into that in a second.

But probably the first thing, and the more important thing, is the location of the real e state. I always start with the location. It’s almost like Google Maps. When you zoom all the way out of Google Maps, you’re looking at the big picture view of the whole country, of the whole world, you see certain trends when you do that big zoomed out view. In real estate investing, the big trends you want to look for—

Pittsburgh, I think, is a good example of some positive trends from what I could tell. In general, you want to invest in an area where population is increasing over time. And you could see that kind of data at the or the equivalent in whatever country you’re in. And so you just want to see, “Alright, what are the trends look like? Is population increasing?”

Like Detroit, [unclear 27:15]. For a long time, it was losing population for decades. It wasn’t a surprise. Two or three decades in a rows, it was going down in population. It actually might be making a comeback. I’m not 100% sure. I haven’t seen much of it.

But the point is you can see the big, huge demographic changes. You want a city where there’s some net population increase. And you also want a city or a metro area where there’s actually a pretty good diverse economy.

And what I mean by that is if you went into a town where 90% of the employment was from a military base, one military base, the thing that makes me nervous about that is what happens if five or ten years from now, they pull the plug on that military base.

So, what you’d rather have is a diverse economy with a lot of different businesses, a lot of different employment sources. And you’d really like to see professional, young professional kind of employment growing, if you can. So that 20-something or 30-something who makes good money.

You want working class jobs, but you also want some of those white collar jobs as well because that’s going to influence the prices a good bit because they’re the ones buying houses, they’re the ones moving into the new, trendy districts.

If you’re zoomed out on Google Maps, that’s what you’re looking for. You’re looking for that population and the economic kind of factors.

And in general, that can take you an hour to do some research on that. And if you’re from a city, [unclear 28:47], there’s reading the newspapers and studying it. You’ll find out whether your city is doing well there. That’s where I would start.

And then, I would zoom in on the city. And I would more on the neighborhood and the street by street level to find neighborhoods that have some qualities that are attractive places to live. And it’s going to be very different from town to town, city to city. But in most urban areas, or small urban areas, you want to look for things like how close is this property or this neighborhood to a big park, a big public space, or some kind of area that the city or the community has that’s really popular.

In a lot of areas right now, bike trails and parks, little commercial districts with a lot of shops and coffee shops and things like that, it’s very intuitive. When you live in a city, you’re going to know the areas where everybody wants to be. And so you just start with that. I make a little Google Map and put a push pin right in the heart of the city, and then start zooming out like, “Alright, here’s the hottest area where everybody wants to live.” And I draw a big, red background around that area.

And then, the coolest places where the most opportunity will be is right on the edge of those hot areas. You can find something that has some of the similar qualities that’s also close to the park, it’s also close to the commercial district, but it’s not yet as expensive as the best area.

That’s kind of the fun puzzle of looking at locations. You’re looking for those little opportunity areas. And you do all of that before you start looking at specific properties because that’s what’s going to drive your future economics particularly with buy-and-hold.

What I love about buy-and-hold is that you don’t have to be like a day trader who figures everything out like today. All you need to look at is the big, macro level, long-term trends. And those trends are super slow-moving, easy to follow.

Real estate is not like a quick “man, this whole market is crashing tomorrow” kind of thing. Things happen pretty slowly. Even in 2007 and 2008, the downturn happened over like a six to nine month period. And you could see the clouds on the horizon if you were really looking for it.

So, that’s the cool thing about real estate and buy-and-hold. You don’t have to be a genius. As you can see, you can just look at the long-term trends, try to buy on locations that have some long-term possibilities. And then, you get to the sticks and bricks, like the actual property. And what you’re trying to do is you’re trying to generate as much rent as you can for the cost of that building.

And so that’s where we got into the type of building you want to have. I like very efficient buildings. I have a friend who have a property in Seattle. And his rental property basically looked like a milk carton. It’s really like small footprint. And it went up like three or four stories. And it had a tiny, little lawn. He basically said you could cut the lawn with scissors or something. It was so small.

On the other end, if you’ve got a big property that had this enormous lawn, and you had to cut it all the time, if you have a lot of square footage, bigger properties are not necessarily better in real estate. What you want is as much rent per square foot as you can get. And the bigger property you get, every time the tenant moves out, you’re going to have to paint it, you’re going to have to replace flooring.

And so, you want to look for efficient buildings and desirable areas. And then, you want to buy them at a price that allows you to make a reasonable cash flow today. But over time, hopefully, that will get better.

Mad Fientist: I was just listening to a podcast where Brandon Turner from Bigger Pockets was on. Obviously, he’s always looking to add value to a property after he buys it. And one of the things that he looked for was like two bedrooms above a thousand square feet because he always thinks that he could somehow get a third bedroom in there. And that’s a really good way to increase that cash flow that you’re getting from rental income.

Are there any sort of things like that that you keep an eye on as well?

Chad: Yeah, that’s a good tip. Two bedrooms, if you get over 1000 sq. ft., his idea is like maybe you have a dining room that you could convert to a bedroom. And it’s very cheap to build a closet. You just basically frame it out with wood, and then put sheet rock, and put some doors on it. That might cost $1000 or less to do that.

And so, basically, by spending $1000, you now increased the value potentially—in some markets—$10,000, $20,000, $30,000. So that’s what he’s looking for for value add. And I do that as well.

I think another trick is to look for unused space in a building. A basement would be one example. If you could convert a walk-out basement that, right now, is just unused space, just used for storage, you can look for the local ordinances and perhaps you could turn that into an extra rental unit that could actually make money. That’s the kind of thing.

It takes a little bit of local knowledge. Some cities will allow that. Some cities will say there are certain requirements that you have to have. That’s where you study what’s going on locally. And there are tons of opportunities like that where you can just look for unused space and convert it to something different, even parking.

In Pittsburgh and some of the more urban areas, I think parking is a big deal. So maybe you can find a building where they’re not charging for parking right now or where there’s some extra space that you could convert into parking, and then charge people for that. That’s the kind of thing that can turn an average deal into an above average deal that makes extra cash flow.

Mad Fientist: That’s the thing that really appeals to me. We were just looking for a place to rent in Edinburgh because we moved out of our place in the spring. And we saw this small, little apartment come up. It was only like 460 sq. ft. But the space was already really utilized very nicely. And there’s some room for improvement there. And it was like, “AirBnB people don’t care. Edinburgh is such a hot city for AirBnB.” And it’s like, “They don’t care if they have 460 sq. ft. versus 1000 sq. ft. So we could buy this place for way cheaper than most of the places in the city are going for, and then still get the same amount of rent and live when we’re not there.”

And just the thought of 1) maximizing space just super appeals to me because efficiency is what I love to focus on more than anything with anything. But then also doing it up to really high standard. And it wasn’t very overwhelming because there’s not that much space. You don’t have to spend a fortune to do something really nice and make it really comfortable because there isn’t that much space to furnish and paint and decorate and all that stuff.

Chad: Yeah, I love that idea.

And to me, there are so many crossovers when you do real estate between practical financial benefits and also personal, philosophical things as well. You just mentioned liking efficiency. And to me, I’m really interested in urban design and how cities are designed. And one of the main messages I get from smart growth and smart development is you want to have very efficient city design where you have more density in some areas, you have public spaces that everybody can use, and then you have that connected by public transportation and biking and walkability.

And so much of what I think makes people happy and makes me happy in a lot of these urban environments can also be more profitable in some cases. So I love it when you can find the intersection of something that you know is the right way to plan a city. And you can encourage that and make money from it—and to do that again.

And so real estate is very hands-on. And it’s very tangible. And you get involved in your local community. Somehow, I got talked into being on a plane in commission for two years before I left for Ecuador. I’m not going to do that again, but it was a super good learning experience on how cities are designed and sometimes how cities are not consciously designed. Stuff happens.

But on a local level, when you get involved, you can make a big impact. Sometimes, at these city council meetings or town council meetings, there’s like 10 people at the meeting. And so if you’re a passionate person who thinks those kinds of topics are important, and walkability and bike trails are important, you can get in there and show up at every meeting for 30 minutes and make a big impact. And I think that’s pretty cool.

Mad Fientist: That is cool. And yeah, you mentioned being more part of your community. And that’s something that I feel that’s one of the only things that’s lacking in my life and my wife’s life currently. We move around so much, so we don’t ever feel like we’re settled. And since I’m like an introvert by nature anyway, if I know I’m going to leave somewhere in two years, I’m not exactly going out and trying to make a bunch of friends.

All of our friends are either back at home where we used to live or where I went to high school and things like that. And I realized that a big piece of happiness is just like running into your friends randomly and not having to plan week-long trips to go see everybody that you like hanging out with.

So it’s like, “Alright, we’re not going to stop moving around the way we are. So maybe buying somewhere would ground us a bit.” And then, that led me to this thought—which I had mentioned Brandon Turner earlier. And he seems to coin all these cool terms in real estate like house hacking and the BRRR strategy that you read about and stuff like that.

So, I came up with my own strategy that I’m calling peak arbitrage. I’m going to run it by you, and you can see what you think.

Chad: Alright, I love it.

Mad Fientist: You heard it here first. This is the coining of this term if it is a thing. If it’s a bad idea, then I’ll give it to Brandon Turner…

Chad: The Mad Fientist has been boiling something up in his cauldron. I love it!

Mad Fientist: Yes, exactly. This is the first time it’s coming out to the world. So you’re hearing it first.

So, this is the thought.

Since my wife and I are from two different countries, no matter where we settle, both of us aren’t going to be completely happy because one of us is going to be super far away from friends and family that they grew up with, and they’re always going to be like, “Oh, I want to go back to America” and Jill will be like, “Oh, I want to go back to Scotland.”

So, we’re flexible obviously. Jill is still working. But she’s working in a part-time, like just picking up shifts capacity. I’m obviously not working.

So, the thought was—this is like two dreams in one. We love Edinburgh. It’s a great place. And it’s got a fantastic short-term rental market because it’s a beautiful city. It’s extremely walkability. Tourists aren’t going to stop coming to the Edinburgh unless the castle gets blown up somehow.

Chad: It’s been there a while though. It’s probably still going to be there.

Mad Fientist: Yeah, exactly. It’s been there a long time.

And then, my long-term dream was to always just live in a mountainous area so that I could play pond hockey on the weekends and go skiing all the time and maybe get a part-time job as a ski patrol guy and throw bombs and create avalanches and stuff with a bunch of guys like super early in the morning.

So, my thought was, since peak travel season for those two scenarios is quite different, if we bought a small flat in Edinburgh, and we stayed there from say January 1st through July 31st, we’re cutting into some of the peak travel season there because summer is quite big. But we could obviously maybe leave in June, and then travel around before heading to the States.

So then we reap crazy amounts of rental income from peak season there. The Edinburgh Festival is like the biggest arts festival in the world. Just crazy prices for staying in Edinburgh during that time. And then, if we had a house in the mountain somewhere, we could stay there from July through to Christmas, say, and we would get to enjoy the last bit of summer there, get to enjoy the fall (which is one of my favorite seasons), and then ski for a few months before then leaving and renting it out for the big part of the ski season which is Christmas, New Year, and then late winter, and then early spring skiing. And we would be back in Scotland where it’s super cheap because nobody wants to come to rainy, dark Scotland in January through whatever.

So, you’ve got the best of both worlds. You’re getting the best of both lifestyles which, obviously, at this point, it would be a lifestyle play—a lifestyle play with investing in mind. I wouldn’t just go out and buy a boat because I want to enjoy a boat because that’s a terrible investment. But this could be a reasonable investment—maybe not the best investment, but reasonable and yet we’re enjoying that lifestyle as well.

It’s something I would’ve never considered. But somebody that you also interviewed for your book, [unclear 41:36]—which is somebody else we’ve met in Ecuador—he was talking to me about it, and he has some mountain properties and he said they’re actually really great investments where he’s invested. So it made me think, “Ooh, maybe it’s not just a thing rich people buy that just is a complete waste of money. It could potentially be a good investment.”

That’s a long way of introducing you to my peak arbitrage strategy, but what are your initial thoughts?

Chad: I think it’s brilliant! The Mad Fientist has struck again.

To me, I’m just kind of reflecting on it as I talked, but the thing I like about it is owning your residence and turning your residence into an investment is one of my core strategies that I talked about in my book. It’s one of the main ways I talked about people getting started in real estate. And in fact, in your case, it might be the only real estate you need to own. And it does a few things.

I love the fact that you’re getting some of the “happiness quotient” that we talked about—like getting into a community and having some roots. It’s something that my wife and I have talked about a lot too. We know here in Clemson, South Carolina where we are, we have family nearby. I’ve got real estate investments. I’ve got friends. We’ve got friends. We’ve got a community. We’re never going to be totally out of this community. But at the same time, we have these other places we love, and we’re going to travel.

So, I feel completely related to what you’re saying. “How do I have roots, but also have flexibility?” And I think having an efficient, high demand property that you live in, and also do short-term rentals in is just an awesome opportunity. You’ve taken advantage of the technology and the way things are changing in the Internet world.

AirBnB and other short-term rental possibilities, that would not have been possible 20 years ago or probably 10 years ago. And so, you’ve taken advantage of the economy, what’s going on, you’re aligning it with what’s important to you.

And then, as an investment, real estate has several core benefits. One of the first ones is income, the fact that a rental property produces income. When you live in it part of the year, and it’s not going to produce as much income, that’s not really the play. By doing a short-term rental, sometimes, you can make as much income in five or six months as somebody else with a long-term rental would make in a year.

There’s a little bit more work to it. But the main thing I would see on that plan is you’re sort of running a hotel when you do these AirBnB’s. I think you can do this, but I think you need to find some people on the ground, like a really good, trusted person, who could be sort of your co-host. You could pay them a fee, and build that into your numbers to make sure that you’re paying somebody a reasonable fee. It keeps them excited to help you out.

When you’re traveling around in the US or in the mountains throwing bombs to get avalanches, you’re not going to want to hear about something going on in Edinburgh. You want somebody there who can take care of things.

Like what I did in my case, I gave my key person back at home a decision matrix. I said, “Look, if it’s below $200, I just want you to make the decision. And if I don’t agree your decision later on, we’ll talk about it. We’ll learn. But I’m not going to penalize you for you making a decision that you thought was the best thing.

So, that’s what I did. They could make a decision. “I trust you. If it’s a $500 decision, okay, text me. I’ll get back to you.”

So, that removes a lot of the day-to-day stuff. I think, in your case, having some management on the ground will be the key piece of the puzzle t make that work, and then also finding the property you were talking about earlier—that efficient property that makes you happy, that’s walkable.

But also just looking at the numbers and seeing what those numbers look like, I’m willing to bet that, over time, if you owned a property in Edinburgh, like an efficient 400 or 500 sq. ft. kind of apartment in a good location, the appreciation play on that over the next 20 years is probably going to be pretty good. You’re giving yourself a good hedge to other investments and other money that you have.

Mad Fientist: Alright. Well, I’m excited. That’s really good.

Talking about having that efficient place—efficient also in the sense of longevity and durability, I guess, is what my question is—do you know of any good books or online resources that dive into like, “Okay, if I’m going to create this with the sense of maybe renting it out to short-term people on AirBnB, what’s the best sort of materials to use for all the different areas of the house so that it lasts and it’s easy to maintain?

Chad: Yeah, I mean Bigger Pockets is a good community to get in for that. I don’t know anybody with any books particularly. You could just YouTube. Every house problem that I don’t know how to solve, I YouTube it, and I almost always find some guy or lady showing me how to do it. So you could do YouTube.

And then, Bigger Pockets, in the forums, there are tons of conversations about materials for rentals. Should I use luxury vinyl tiles or ceramic tile? And what’s the cost difference? That’s one of the cool things about real-time communities is that you can just ask questions. For example, you could post your question on there. “I’ve got a 500 sq. ft. apartment. It’s going to be a long-term rental. It’s going to be AirBnB. What floor surface has gotten all of you the best return on your dollar long run so that it’s durable and I don’t have to keep replacing it.”

So, that’s a place I would go. But in general though, the longer you’re going to hold an investment—some of the mistakes I made personally was being cheap on my materials. “Oh, that’s the cheapest way to do it right now.” And then, you install this product or whatever, and it ends up costing you a lot more in the long run.

I’ll give you an example. We’re selling a house right now. And during the inspection, when the buyer had their inspector in there, they found a leak behind a wall and a bath tub. Somehow, they saw it, like some of the floor was wet from when they look from underneath the house. And this is probably installed before we brought the house. And we learned after taking out the carpet and the floor—we had to rip the entire bath tub out—all of the joists (the joists are like the support beams underneath), they’re all half-rotted.

This entire floor system was like wet and rotted. And when we finally got it all ripped out, they showed me what had caused all of that mess in these thousands of dollars of damage that I’m having to now replace. And it was this one little connection piece where the shower head connects to the pipes behind the wall. It was plastic. It was this little plastic piece. Somebody had just twisted it too much.

And they said, “You know, if that had been a metal piece, whoever had bought that had not bough the ¢50 and they bought the $1.50 piece instead, you would not have to spend like thousands of dollars.”

And I said, “Oh, my God!” What a revelation.

If you can go a little bit more expensive on a long-term property, if it’s going to be more durable and less likely to break over the long run, go for it! It’s probably going to be a good investment.

Mad Fientist: Yeah. So that’s the [unclear 49:03] for me because I’m always looking for the cheapest thing. And that’s why these smaller properties appeal to me so much. “Okay, it’s 460 sq. ft. Even if we pick the nicest tile or whatever for the bathroom, it’s not going to be breaking the bank if it lasts longer. And it looks good for 10 years or 20 years instead of 5, then that’s going to be worth it.”

Chad: Exactly.

Mad Fientist: That’s good to hear because, yeah, I would definitely be in that camp of trying to save the pennies.

So, my peak arbitrage strategy gets the thumb up?

Chad: Yeah, I like it.

Mad Fientist: Good! The flipside of that, I guess, is something else that I read in your book. And you had mentioned something from the Financial Samurai. Sam had said something about buy utility and rent luxury which, in this case, would be the exact opposite because Edinburgh is very expensive. And I’m sure anywhere a mountain property we would buy would be very expensive. And the sort of argument behind rent luxury by utility is that it doesn’t make sense in these markets to pay the premium to own because, a lot of the times, the rent’s a lot cheaper. And Edinburgh is a perfect example. This flat that we’re considering is £800 a month to rent or I think it ended up going for something crazy which is why we didn’t get it because we didn’t even get close. I think it went for like £260,000 to buy. So the 1% rule that you often hear about, that doesn’t come anywhere close.

So, in that case, what Sam from Financial Samurai was suggesting is rather than spend £260,000 to buy a 400 sq. ft. place in Edinburgh to save £800 in rent, you’d be better off taking what is effectively US$300,000 and maybe buying three houses in Pittsburgh that would generate, I don’t know, $2400 in rent. And then, you could use that to pay your rent in Edinburgh and then pocket good profit.

So that’s also very compelling too. Obviously, the lifestyle wouldn’t be the same in that scenario. But what are your thoughts on that strategy?

Chad: Well, that’s basically the strategy I use. People, they’ve talked to me about beach houses and mountain houses. And I’m perfectly happy renting a mountain house or renting a beach house.

But I think it’s a little bit different than your peak—what is it called, peak arbitrage?

Mad Fientist: Peak arbitrage… oh, man. See, the branding must not be good if you already forgot it. That’s terrible! I need Brandon Turner to give me a good key title.

Chad: Yeah, yeah. Let’s brainstorm with Brandon a little bit about that. I think we can make it work. But it’s a little bit different because there’s also the utility that we talked about, those factors.

And I see Edinburgh and living in a downtown area is a little bit different than living at a vacation spot. I’ve been thinking in your case. Maybe you own in Edinburgh or you own in the mountains or one or the other. Maybe you don’t own them both. And then, maybe you take some of that other money. You allocate a certain amount of money to real estate that you’re comfortable with in your overall portfolio. You put some of the money into whichever place makes the most sense financially, whether it’s Edinburgh or the mountain. And then, you take the rest of the money. And basically, what I do is just own solid rental properties that produce good incomes in areas where the rent-to-value ratios are good and where the long-term economics that I’ve talked about earlier are also good.

The thing about big cities like San Francisco and New York, some of those places, they have the best long-term economics. People are always moving there. Urban areas are not going away. But their short-term economics are really, really tough. It just depends on what your goals are, how much income you need.

You’re probably going to make a lot more appreciation in some of those long-term places like Edinburgh. I can just imagine 20 years from now a property in Edinburgh being worth a lot more because it’s really difficult to build. It’s really difficult to find places, any kind of land, I imagine.

Mad Fientist: Oh, yeah, absolutely.

Chad: It’s just going to be almost impossible. And so you’re basically playing on the fact that supply is super limited in the core of the city. You don’t know how that’s going to affect your long-term investment, but that’s supply and demand. You get high demand, really low supply. So maybe—

This is kind of a Warren Buffet play. Warren Buffet learned, in his career, he used to buy the super dirt cheap companies that had awesome metrics. You can buy it dirt cheap. He learned eventually though that he would try to buy the best companies, the really solid long-term companies, and he wouldn’t be able to get those at as much of a discount. But they were growth plays. They were long-term plays.

So, all the companies he owns now like Geico and Coca-Cola—I’m trying to think of all the different ones—he didn’t get a steal on those properties, but he’s made a ton of money in the long run.

And so, I guess going back to your point, I think a combination of those two could be good. I see a principal residence in a core location. If you buy it, and you get a ton of utility, and you get a ton of satisfaction out of being in the same place in a good location, and the short-term rental kind of changes the economics a little bit—you mentioned $800 a month as a rental cost, but I wonder what the short-term rental numbers…

Mad Fientist: That would be over £100 a night. It’s over £100 a night, especially in the summer. I haven’t checked. I’ll see what it is in the fall and the winter. But yeah, it’s over £100 a night for something that’s small in that exact location.

Chad: So, even if you had 50% occupancy for the year—I’m trying to think in rough numbers. Three hundred sixty-five, 150 days a year, that’s £15,000 or something like that for six months.

Mad Fientist: Right, yeah, exactly.

Chad: The point is I guess the economics can—this is what you do in real estate. You got to find a little niche. If you just get to play the average, normal stuff, the numbers might not look great. But if you can get an awesome location, and you can do something like short-term rental or some other kind of niche to get more income from it, you can now turn—maybe that’s not the 1% rule still, but it’s a decent—you kind of get that some of that Warren Buffet kind of quality property territory where you’re making a decent income, you’re getting a lot of utility, a lot of joy, a lot of satisfaction out of being there and being part of a community, you’re getting appreciation.

And then, you could take another chunk of money if you really wanted, like the solid income, go to a growth area in Pittsburgh and buy a property for $150,000 that maybe rents for $1200 or $1500. And the numbers are going to be better. So you’re sort of diversifying between those two strategies.

Mad Fientist: Nice, alright, cool. That’s great to hear. And one of the interesting things about the Edinburgh thing which actually was the only reason I started actually looking into it is because the pound has dropped so much. And since all my money is in the US, even though real estate is still hot in Edinburgh, to me, it’s sort of on sale because that currency exchange rate dropped so much. So it’s maybe a good time for me personally to buy. Whether or not it’s a good time with a hot market in Edinburgh, that’s a different story. But if it’s a long-term play, then obviously, I’m not going to get into currency trading or anything like that if we’re talking about Forexer stuff because that’s mostly speculation.

But it’s like, well, relative to the past, this is actually looking more on sale than it has been in a long time even though the market itself is quite hot.

Chad: Yeah. Yeah, I agree. And you made a really good point earlier that I wanted to go back to about buy utility and rent luxury. In general, that’s still a good strategy for everybody to think of. The point is like you could go to one extreme like Jeremy, our friend at Go Curry Cracker. He and I have debated back and forth about ownership versus non-ownership. If you’re super mobile, and you’re just not wanting to settle down anywhere, owning 100% investments and always renting everything, that works. That’s cool!

I think what I love about this conversation is we’re bringing in the nuance of what makes us happy and also what’s profitable. When you have some knowledge of real estate, and you can sort of diversify yourself into it, you can have ownership of property and flexibility just by knowing how to operate a rental property and by doing that.

And that’s what I found. My trip to Ecuador was an experiment. Can I own properties that have a lot of utility and then have the flexibility for our family to do whatever makes us happy.

And for that 17 months, that’s what made us happy. I don’t know what it is going to be two years from now. But having some well-placed chess pieces within the real estate board and within other investments gives you tons of flexibility if you plan it ahead of time.

Mad Fientist: So, for someone who is enjoying the flexibility and the low stress of just owning index funds pretty much, one of the biggest worries about diving into real estate for me personally—and I’m sure a lot of people in the audience—is maybe liability.

Is that a concern for you? Do you mitigate or weight some of those risks through LLC’s and things like that? How do you think about liability?

Chad: Yeah, it is a concern. I think the first line of defense is not even financial. It’s just running your business in a way that you treat people right. And if you do have problems which, inevitably—even if we try our best and treat our tenants right and do everything we can, sometimes things happen. I’ve had an issue in an apartment where they left for the summer and something malfunctioned. They didn’t leave the air-conditioner on. And in the deep south—you went to school in North Carolina, right? You know how humid it gets in the summer around here. And so we ended up having some moisture in there, having some mold grow. It was just a stressful situation for everyone involved.

I’m not saying that the tenant was completely happy. But we communicated with them. We did our best. We all tried to solve the problem. I didn’t ignore it. And therefore, the liability was reduced.

We solved it in the end. It cost me some money. But also, they walked away and we all kind of agreed to be friends.

And so, I think how you run your business has a lot to do with the amount of liability you’re going to have. I think the horror stories people hear about, lawsuits and craziness, my anecdotal evidence is that they’re coming from people who kind of run their properties like a slum lord. They don’t take care of their property and they don’t treat them right.

So, if you look at your relationship with your relationship with your tenant more as a partnership, like they’re the employee or the partner who’s helping you operate your business, then you’ll treat them differently.

And I think everybody who’s listening here, none of them are running out trying to screw people over. They’re going to try to treat people right. I think that’s the first thing I would say. You’re probably going to be fine there.

But then, beyond that, insurance is a big deal. So even if all that fails, you want to have a liability insurance. And it’s actually super cheap. On a regular house in my area, I get landlord insurance in case the house burns down and have an accident like that. And you also get liability insurance, meaning if something happened, if somebody sued you, you can get up to a million or $2 million super cheap, like $100 extra a year to increase it.

And so, to get a million or two in liability insurance is really going to be helpful for most things you need to worry about.

And so, those are your two first lines of defense. And I’m not ask that protection kind of person. There are attorneys who study this stuff and who are really good at this. And so beyond that, owning a property and an LLC is probably prudent. That’s what most attorneys tell me at least just so you don’t combine your real estate property asset and liability with all of your other index funds and other assets that you own.

So you’re just basically keeping them in separate baskets and running that as a separate business, so that if the worst case happened, you’re at least kind of quarantining your problems there.

Mad Fientist: So, you interviewed a lot of interesting people. And you said you learned a lot. Were there any strategies that you heard about through the interviews that you now may choose to implement?

Chad: Yeah. So there’s one about doing 1031 exchanges. Let me explain what that is in a minute. It’s a strategy I have not used, but I’ve known about for a long time. Basically, what it means is when you sell a rental property, one of the tax benefits, which I’ve written about in your site with the tax benefit article, is you can sell a property in real estate. And as long as you replace it and follow the IRS’ rules with a similar property, then you don’t pay taxes on that transaction. And that’s a super big deal.

And so, for me, because I’ve accumulated properties, I’m now in the stage of sort of moving the chess pieces around the chess board so to speak. I’m selling some properties that are not optimal. And I’m replacing them with other properties. And by doing that, you can really accelerate your wealth plan or your income or the quality of your investments without paying taxes. It’s super tax efficient.

And so I’m actually in the process right now of doing my first 1031 exchange. Studying the books and listening to others sort of showed me what I already knew, but this sort of demonstrated the power of doing that. And it’s something I’m going to play around with as well.

Mad Fientist: Oh, nice. And hopefully, we read about it in

Chad: Absolutely! I’ll show you all the numbers and share the details for sure.

Mad Fientist: Fantastic! Well, this has been amazing, as always, chatting to you. I know I’ve cornered you in coffee shops in Ecuador before to talk about this stuff.

Chad: Any time, any time…

Mad Fientist: So it’s always a joy. And I always end all my interviews just asking what’s one piece of advice you’d give to somebody on the path to financial independence? And I’ve obviously asked you this in our last interview which was a couple of years ago. So it’s fun to ask that again just to see if your thoughts have changed.

So, what’s your one piece of advice this time?

Chad: Yeah, I’m going to go with the theme of my book. And it’s becoming the theme of my life that I’m trying to get out there. It’s just do what matters. And I think this applies whether you’ve reached financial independence or not. I think that’s my lesson from my reading of your articles, and what you’ve realized after financial independence, and my own realization. Life doesn’t start when you get to the peak of the financial mountain. Life is like all along the way.

And so, if you’re climbing that mountain, you can do what matters now. Enjoy your family if that’s what matters. Enjoy your friends. Take time to travel. Take mini-retirements. If you have a cause or something that’s important to you, or you think is important now, don’t wait 15 or 20 years from now when you have enough money. Just do it now.

Get involved. I think that philosophy of doing what matters and kind of building your life around it has been really refreshing for me. I’m a money nerd. I love the spreadsheets. I love real estate. But when it comes down to it, the joy and the happiness you get out of your life I think is aligning that money with the people and the causes and the activities that really excite you and make you passionate.

And so, I’m working on that. I’m not perfect for that. But that’s kind of my aspiration. And I guess I just encourage people to do the same.

Mad Fientist: Yeah, I couldn’t agree more. And yeah, as you mentioned, that’s something I’m realizing more and more, how important that is.

Your answer is different than the first interview, but both were good. This one shows that you’re sort of on the same path as me. You’re thinking and realizing that money is not everything. Your first answer was similar to that vein. If you remember, it was keep it simple. And that was with investments and that was with life in general which was a great advice. The more I’ve simplified, the just happier and more carefree I feel.

Chad: For sure…

Mad Fientist: But yeah, you can see that your thinking has been evolving just as mine has been. So that’s good to see.
Chad, thanks so much. This has been great. I’m so excited about the book. So if anyone wants to get it, should they just head to Amazon? I can maybe link to it in the show notes.

Chad: Yeah, if you look up Retire Early with Real Estate on Amazon, it’ll be there. I actually recorded the book. So if you can put up with my southern accent for eight hours, then you can join me on the audio book. And also, there’s a digital book and a print book.

And if you’d like to order on Bigger Pockets, they actually have some—you can get it on Amazon, but on Bigger Pockets, I did some bonuses where I interview people like Paula Pant and Lisa Phillips and one of my mentors, John Schaub, Building Wealth One House at a Time. It’s really cool for me to interview him because he’s been doing basically what I’m doing for like 40 or 50 years. And so it was really fun for me to get to pick his brain about early retirement.

He actually took a little shot at the FI community. He was kind of joking. He’s like, “I don’t really like to be frugal. I like airplanes.” That was it! I was like, “You’re kind of boxing in the whole FI thing.” But it was fun. He was like, “I like airplanes. So I just buy another house or two to pay for my airplane habit.”

Mad Fientist: You mentioned that book on the first time I interviewed you. So that must’ve been really cool to interview the main book that you recommended I think it was.

Chad: It was really cool. I interviewed him. And that interview is available. If you buy it through Bigger Pockets, you get those as kind of a bonus for buying through them. So that might be a reason to check that out. It’s just fun to get to hear other people’s perspectives other than mine on this whole journey of financial independence.

Mad Fientist: Very cool! Well, I will link to all of that in the show notes, so you can find that there.

Anywhere else people can find you? Should they just head to just to say hello if they want to chat.

Chad: Yeah, yeah. I’m on I’m still publishing weekly. If you’re interested in this whole concept of investing in real estate so that you can retire early and do what matters, that’s my mission. That’s what I’m doing every week. I’d love for you to join me over there are

Mad Fientist: Cool, man! Well, thanks again. I look forward to seeing you in Orlando, right?

Chad: Yeah! See you soon.

Mad Fientist: You’ll be there for FinCon?

Chad: I can’t wait! FinCon 2018.

Mad Fientist: Very cool! I’ll see you in like a month.

Chad: Alright!

Mad Fientist: Excellent! Alright, man. Well, it’s been a pleasure. And yeah, I’ll speak to you then.

Chad: Thanks for having me.

Mad Fientist: Alright! Thanks. Bye!

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Section 199A – The Tax Break of the Century Fri, 17 Aug 2018 10:08:38 +0000 Section 199A of the Tax Cuts and Jobs Act of 2017 is the biggest tax break of the last 50 years so find out how to take full advantage of it!

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I have a confession…

For the first time in my life, I paid someone else to do my taxes.

I know this may take you by surprise, considering I write a lot about tax avoidance around here.

While I do enjoy figuring out ways to hack the tax code to help you retire even earlier, I have a valid reason for outsourcing this time – I set up an S-Corp for my business and I didn’t want to learn how to do S-Corp tax returns.

Thankfully, I found a brilliant guy named Stephen Nelson to do it for me!

Not only is Steve an amazing accountant, he’s also an accomplished author who wrote QuickBooks for Dummies and Quicken for Dummies (both of which sold over a million copies).

When I found out Steve was also an expert on the most exciting new tax break to be released in decades (i.e. Section 199A of the Tax Cuts and Jobs Act of 2017), I knew I had to get him to write a guest post.

The new Section 199A deduction will save me and my wife over $10,000 in taxes in 2018 so hopefully it will save you a bunch too!

Take it away, Steve…

The Section 199A tax deduction surely counts as the best small business and individual investor tax break of the 21st century.

Using Section 199A, business owners and real estate investors may get to simply “not” pay income taxes on the last 20% of the income they earn!

And the best part? You don’t need to burn any cash or make big financial commitments or suffer through mind-numbing complexity.

To get the big savings, you just need to do your tax return right.

Let’s get into the details…

What is the Section 199A Deduction?

The Section 199A deduction gives owners of pass-thru business entities (e.g. sole proprietors, partners in partnerships, some real estate investors, and S corporation shareholders) an extra deduction equal to 20% of their business income.

Example 1: You earn $100,000 as a sole proprietor. In this case, you potentially get a deduction equal to 20% of the $100,000—or $20,000.

The only rub for the typical taxpayer? The Section 199A deduction can’t exceed 20% of your taxable income.

Example 2: You earn $100,000 in a sole proprietorship but you use the $24,000 married-filing-jointly standard deduction and shelter $26,000 using a solo 401(k). In this case, your taxable income equals $50,000. You don’t get a Section 199A deduction equal to 20% of the $100,000 of sole proprietorship profits ($20,000) but instead get a Section 199A deduction equal to 20% of $50,000 ($10,000).

The taxable income limitation doesn’t always matter though, as you’ll see in the following example:

Example 3: You are married and earn $100,000 in a sole proprietorship. Your spouse earns $60,000 in a regular, W-2 job. You use the $24,000 standard deduction and shelter $26,000 using a solo 401(k). In this case, your qualified business income equals $100,000 so the deduction equals 20% of the $100,000 ($20,000). Your family’s taxable income, $110,000, doesn’t come into the Section 199A deduction calculation since it’s higher than the qualified business income.

The Finer Details of IRC Sec. 199A

Qualified business income includes sole proprietorship profits, real estate investor rental income (if your real estate investing rises to the level of a trade or business), and the shareholder and partner “profit allocations” reported on the K-1s that S corporations and partnerships send their owners.

Qualified business income does not include capital gains, interest income, or dividend income.

Another important thing to note: Qualified business income doesn’t include income earned outside the United States. The qualified business income deduction only applies to domestic income (not foreign income).

And then a couple of surprises to the unwary: Qualified business income doesn’t include S corporation shareholder-employee wages, guaranteed payments made to partners of a partnership, or other amounts a partnership pays to a partner for services.

Example 4: If an S corporation shareholder’s share of the profits in some venture equals $100,000, but $60,000 of this profit is paid out as shareholder-employee wages and then the other $40,000 gets reported on the S corporation K-1, only that $40,000 of profit counts as qualified business income and plugs into the qualified business income deduction formula.

Example 5: If a partner’s share of the profits in some venture equals $100,000, but $80,000 of this profit is paid out as a guaranteed payment and then the other $20,000 gets paid out as a distribution and reported on the partnership K-1, only that $20,000 of profit counts as qualified business income and plugs into the Section 199A formula.

A High-Income May Limit IRS Sec. 199A Deduction

Most folks don’t need to worry about this, but single taxpayers with taxable incomes more than $157,500 and married taxpayers with taxable incomes more than $315,000 get their qualified business income deduction limited based on the W-2 wages the business pays and based on the depreciable property held in the business. But how this works is complicated…

Below the $157,500 or $315,000 taxable income levels, neither wages nor depreciable property matters.

For single taxpayers with taxable income more than $207,500 or married taxpayers with taxable income more than $415,000, the qualified business income deduction can’t exceed the greater of two amounts:

50% of the W-2 wages paid by the business, or

25% of the W-2 wages paid by the business plus 2.5% of the original cost depreciable assets used in the business.

For single people with taxable incomes between $157,500 and $217,500 and for married folks with taxable incomes between $315,000 and $415,000, the limitation phases out on sliding scale (for the gory details about how this works, you can refer here: Sec. 199A Phase-out Rules).

High-income Professionals Potentially Lose Twice

All the standard professionals (doctors and lawyers and such), investment professionals, athletes, performers, and any one-person celebrity businesses (someone earning appearance fees or product endorsement income) face another equally painful phaseout.

Single professionals with taxable incomes greater than $157,500 see their Section 199A deduction phase-out because they’re professionals (the phase-out is 100% once taxable income equals $207,500).

Married professionals with taxable incomes greater than $315,000 see their Section 199A deduction phase-out too for the same reason (for these people the phase-out hits 100% once taxable income equals $415,000).

These types of folks who are in the phase-out range can potentially get whacked a second time if they don’t have enough W-2 wages or depreciable property to fully support a Section 199A deduction.

Other Income Gets Sheltered by Sec. 199A

Just so you know, some investment income also gets sheltered by Sec. 199A and so plugs into the qualified business income deduction formula: qualified REIT dividends, qualified agricultural and horticultural dividends, and the income from qualified publicly traded partnerships.

Note: I’ve got a longer discussion about how the Section 199A impacts investing at my blog, Section 199A Changes Rules for Investors.

Actionable Insights

The new law burdens taxpayers with complexity, as the preceding paragraphs hint. But basically you have four gambits you will want to use in order to maximize the Section 199A deduction and the tax benefits you receive.

Gambit #1: Maximize Qualified Business Income

You want to maximize your qualified business income.

S corporations and partnerships, for example, want to look at dialing down shareholder-employee salaries as well as partner guaranteed payments.

Sole proprietors should reassess whether it makes sense to pay family members wages.

Business owners operating both inside and outside the US may want to look at moving business activity back into the United States.

Finally, real estate investors may want to look at deleveraging their investment portfolios to “dial up” their rental income (using cash to pay down a mortgage not only saves interest expense but may create or increase the size of a Section 199A deduction, if less mortgage interest expense means more net rental income).

But this caution: As the recent regulations indicate, your real estate investing needs to rise to the level of a trade or business. That means you’re engaged in your real estate business with “regularity and continuity.”

Note: Probably the Section 199A deduction doesn’t work for a real estate investor with a single property. The regulations use the unhelpful adjective “several.”

Gambit #2: Dial Down Taxable Income

Taxpayers often have an incentive to dial down their taxable income (obviously).

But the Section 199A deduction creates new incentives for taxpayers who trip over the threshold amounts ($157,500 for single taxpayers and $315,000 for married taxpayers).

If a taxpayer will lose the Section 199A deduction or some of the deduction due to a high income, reducing taxable income delivers big benefits.

A giant pension deduction, which would always be attractive, may become irresistible if in addition to the pension deduction, the taxpayer also gets another $30,000 or $60,000 Section 199A deduction.

And keep an eye on your filing status. We’ve seen clients who in past have filed married separate returns but will probably decide to file married joint returns going forward—just to double the phase-out threshold from $157,500 to $315,000.

Gambit #3: Know Your Limitations

If your Section 199A gets limited due to wages or depreciable property, creatively explore what you can do to bump your wages or depreciable property.

Sometimes, a shareholder-employee in an S corporation may benefit from bumping up his or her wages—in spite of the additional payroll taxes—because those larger wages support a larger Section 199A deduction (you have to do the math for your exact situation in order to be sure).

And then a common trick for any real estate investors: If you are getting a Section 199A deduction because your real estate investments produce taxable income, you may want to avoid things that push down your properties’ depreciable basis.

One example of this would be avoiding a Sec. 1031 like-kind exchange but other depreciation methods and accounting choices can also depress depreciable property.

Gambit #4: Use Tax Savings Wisely, Grasshopper

A final tip—and one that especially relates to folks aggressively saving money toward financial independence…

Use the tax deduction and the savings it produces wisely.

Someone who receives a $50,000 Section 199A tax deduction might just use that deduction to dial down their income taxes by $12,000.

But you could choose to use the deduction and the savings in more creative ways.

One example? If you’ve put a $50,000 “free deduction” on your tax return, maybe you use that deduction to shelter $50,000 of Roth conversion income and maybe you do this for the next several years.

Two Final Comments

Before I wrap this up, two final quick comments.

First, the Section 199A qualified business income deduction goes away after 2025.

In other words, the deduction only appears on tax returns for the years 2018 through 2025. It’s a temporary loophole.

And then a final thing to know: Because the qualified business income deduction includes so many variables (qualified business income, taxable income, potentially W-2 wages and depreciable property), which in turn depend on a bunch of other variables, the deduction’s effect ripples through your tax return. Check your math. Then check it again!

Hey, it’s the Mad Fientist again. Thanks very much, Steve!

Exciting stuff, right?

Steve literally wrote the book on the Section 199A deduction so if you want to know everything there is to know about this new tax break, you can check it out here (Note: He wrote the monograph specifically for tax accountants and attorneys so it’s very detailed and is priced accordingly. Steve sent me a copy and I really enjoyed it though so check it out if you want to go really deep on this subject and figure out how you can save yourself the most money with this deduction)*.

As you’ve seen, this new tax deduction is huge news for business owners!

It’s yet another reason why I think everyone should have their own business. This is actually a topic I will be writing about in my next article so if you want to learn all the ways having your own business can reduce your taxes while improving your quality of life (both before and after early retirement), sign up to the email list below and I’ll email you as soon as it’s published!

What do you think? How much is the Section 199A deduction going to save you in 2018?

Let me know in the comments below and big thanks again to Steve for his fantastic article!

* Full Disclosure: The link to Steve’s book is an affiliate link so I will be compensated if you purchase through the link.

I asked Steve if I could forfeit my cut in order to lower the price for Mad Fientist readers but since the book is targeted to industry professionals (rather than consumers), he wanted to keep the pricing consistent across all sites (which is totally understandable).

What I can do though is this…if you purchase through the link before 8/31/2018, forward me the receipt (and include your address and t-shirt size) and I’ll send you a free Mad Fientist t-shirt (I don’t want to deal with international shipping though so this offer is for US residents only).

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Valuable Lessons from My Second Year of Freedom Mon, 30 Jul 2018 09:15:09 +0000 It's been two years since I retired from my software career so find out all the valuable lessons I learned during my first two years of freedom!

The post Valuable Lessons from My Second Year of Freedom appeared first on Mad Fientist.

It’s insane to me that it’s already been two years since I left my full-time job as a software developer.

To commemorate this special anniversary, I decided to release two podcast episodes…

First Year of Freedom

A reader named Robin reached out and said he recorded himself reading through my First Year of Freedom post and asked if I wanted to use it for anything.

It sounded great and since it’s packed with a lot of interesting insights from my first year of early retirement, I figured I’d publish it to celebrate my second year of freedom.

You can check that out here:

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here

Second Year of Freedom

When preparing the above episode for release, I realized that I haven’t written about what the second year has been like.

Since I’ve learned even more valuable lessons during the second year, I decided to record another episode talking all about it.

Listen below to find out what a day in my life is like now, hear all the ways early retirement is different than I expected, and learn what all these revelations mean for the future of the Mad Fientist!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here

Show Links

Full Transcript

Mad Fientist: Hey, welcome everyone to the Financial Independence Podcast, the podcast that usually gets inside the brains of the best and brightest in personal finance to find out how they achieve financial independence but today is a bit different…

If you listened to Monday’s episode, you’ll know that it is the 2-year anniversary of when I left my full-time job. To commemorate it, I released a recording of a reading of my First Year of Freedom post, which you can check out, and I decided to record this episode of me reflecting on the last year to give you an idea what my second year freedom has been like.

This episode will likely be shorter than you’re used to but hopefully it’ll still give you a sense of what this whole lifestyle is like after you reach your goal and some of the challenges that you face that you may not expect.

I know personally I have not expected a lot of the stuff that’s happened so hopefully you can learn from my experiences and then be better prepared when you eventually quit your job as well.

I think a great place to begin is to actually reflect on my First Year of Freedom post, which you hopefully have read before. Or if not, you listened to being read on Monday in the last episode.

If not, I would suggest go to that. There’s a link in the show notes to that post.

The great news is the only time I actually freaked out about this whole thing was on that first day of freedom, which I talked about in the last post.

Everything else has been really really great.

There’s been challenges, absolutely, but overall the experiences just been incredible.

As I mentioned in that first year post, I was experiencing new things a lot more which has continued into the second year. I recently biked around the Netherlands with some friends, which is been something I really wanted to do for a while.

Just get on a bike for a week and travel around Europe, because it’s so easy to bike around Europe…the infrastructure is great and there’s so much cool stuff to see you in such a small area so there’s a lot of bang for your buck as far as pedaling is concerned.

Since that Dutch trip was so successful, we actually booked another biking trip with friends and had a great time cycling around the wine regions of eastern France and that was it an incredible as well. It just shows the flexibility of FI and what it can provide you because that was sort of a last minute thing.

Our friends were planning a big trip around Europe and asked if we wanted to join them for any piece of it so we just flew out there for a week, biked around drinking great wine, eating great food, and had a really nice time with some friends.

Had we been working, we probably wouldn’t have been able to do that.

So the new fun experiences have continued from the first year and so too has the focus on health. In fact, I think health has become an even bigger focus in the second year because I realized how great it made me feel in the first year and how it’s sort of was like a cornerstone habit that made me healthier in other ways as well.

For example, going to the gym not only made me healthy from the actual going to the gym part but then it made me eat better, it made me drink less beer, because it’s like I’m not going to go to the gym and work that hard and then ruin it with the bunch of beer or something, so it’s been hugely impactful. And it’s been great for my mental health because I feel great, I’m happier, I feel like I’m sleeping better and it’s just been fantastic so later this year I’m going to get my personal trainers, a buddy who just been sending me programs via mobile app, I’m going to get him on the show and we’re going to talk through everything that he’s been putting me through over the last couple of years and it’s going to be a great episode so stay tuned for that.

The decreased stress from the first year has also carried over into the second year, which I’m very thankful for.

It’s actually amazing how awful stress feels when you are able to design a lifestyle that has very little of it. Recently, we were…I can’t remember what the issue was or why I was stressed, but it was like the first time in a while that I can remember actually feeling stressed and it’s like, “Wow I can’t believe people with stressful jobs and stressful lifestyles go through this all the time and how this is just a normal state for people” because it just feels awful and it can’t be healthy for you. So that’s been an incredible blessing.

Also, I think just my mindset shift with money has changed so much that I am less stressed about a lot of things. Back when money felt like it was scarce or that I needed to save every single penny for the FI goal, I’d worry about lots of things like…What if the car broke or what if something happened and there was an accident and I had to pay for something or what if the hot water heater went out or something.

Now, it’s like, “Okay, there’s enough money there so all of these things could still happen but at the end of the day, you know all you have to do is spend a little money that you didn’t expect to spend and the problem will go away.” So there’s not really any need to stress about it and that’s that’s actually been huge for me. It’s just been such a different outlook and it has allowed me to really not fear as many things or not stress about things that could potentially happen.

Part of this carefree attitude towards money is caused by the fact that money is still coming in so as much as I’d love to write about withdrawal strategies and how that’s been affecting me and how I’ve been selling these investments to maintain my spending and how I’d like to talk about the actual financial aspect of pulling the plug on your job, I really can’t because the credit card tool that I built way before Mad Fientist was even around has been bringing in more money than we actually spend. So it’s a great position to be in but it’s not making me be a very good blogger because I can’t really write about all the things that I planned to write about.

It does show that building these sorts of projects while you are working has the potential to make the transition into post-job life that much smoother and that much easier to deal with from a financial standpoint. Also from a happiness standpoint because if you build something before you’ve left your job, you’re going to have something that you’re passionate about that you can work on after you leave your job so as I’ve mentioned in past articles, the fact that money still coming in, Jill is still working, I worked two years longer than I had planned to…all of these things mean that money is no longer a motivating factor in my life anymore which is really weird to come to grips with.

And that’s what it leads me to the next big thing I learned in the past year, which is learning how to say no to really fun and interesting opportunities that come along. Although I got better in that first year of not saying yes to things just because they could earn me money or they could save me money, I was still agreeing to things because they sounded like they be fun. Having fun is great but it still could keep you from doing things that will give you more lasting happiness and enjoyment.

And that’s something that I’ve realized…I think a lot of my unhappiness during my career wasn’t because I had a bad job, because that wasn’t the case…I had a great job and I enjoyed it. And it wasn’t because I felt like I needed more money to spend money on stuff. It was really because it felt like I couldn’t do the things I really wanted to do and it felt like I didn’t have the time to really pursue the things that I was really passionate about that I thought could give me lasting long-term happiness.

The thing I learned over this last year is that even good stuff can get in the way of that so yes, it was easy to get rid of my job because I was like, “Okay, I don’t really love it so yes, let’s get rid of that and then I can start focusing on these other things.” But then, all these other fun and interesting opportunities arise when you don’t have to worry about money or time but they still get in the way of those things that you really want to be doing!

And that’s something I had to learn the hard way, by overcommitting myself during that first year but now during the second year, I’ve said no to a lot of things, which is really tough to say no to fun interesting opportunities but it has allowed me to get into a better routine and make progress on these things that I’ve always said I wanted to make progress on.

Which leads really nicely into another huge lesson that I’ve learned over the past year, which is the importance of habit.

I mentioned in the past that I didn’t want to travel as much as I thought I would have at this stage in my life. And a lot of the reason is because I get a lot of satisfaction and making progress on some of these things and the only way I can make progress is to have a consistent habit.

To give you an idea of what I mean, I’ll just described a day in my life these days, which may not be too exciting but it is so enjoyable. This is surprising because I never thought I would actually enjoy habits or routine but when you get to design it exactly how you want to, then you actually do.

So normally I wake up naturally around 8 a.m. naturally. I don’t have to wake up to an alarm or anything. I have a nice cup of tea cup of coffee usually try to get some things done on the computer while I’m drinking. That’s actually something I’m trying to change because at first I would check my email first thing in the morning but then that would send me on all these other tasks that I didn’t actually need to complete and it would get in the way of what I really want to do that day. So I’m trying to only check email after 3 p.m. now so that doesn’t happen.

But after drinking a cup of coffee, I would head down to the gym and usually spend an hour to two hours there, just lifting weights, which as I said before, I’ll talk more in depth about when I get my trainer on the program. Then, I usually stop by the grocery store or the butcher on the way home and pick up some stuff for lunch.

I then come back, get a shower, make a huge lunch, since it’s probably the first time I’ve eaten all day (which I’ll also talk about in the health episode), and then I’d spend the afternoon working on the important project that I haven’t actually even shared with you guys yet but I will soon, I promise. There’s a lot of Articles I’m planning on writing about this because it’s been such a struggle but also so rewarding.

So I try to work on that until Jill gets home, if she’s working that day, and then we’ll cook dinner together, have a nice dinner, maybe watch an hour of stuff on Netflix, maybe work a little bit more on some of the projects, maybe do some mad fientist stuff in the evening, and then I try to get to bed by 11 so that I can read until I fall asleep, and that’s usually by midnight.

That’s a pretty typical day but that has taken a long time to get to that stage because you need to figure out what times are good for you to do certain things and when you have the motivation to work hard on certain things and when you don’t.

That’s taken a lot of trial-and-error and I’m going to write about some of this stuff because it’s super important I think to having a life that you’re happy with because like I said before, I think a lot of my own happiness is knowing that I should be doing something else or want to be doing something else but not having the motivation to do it or not having the time to do it or not having the money to do it.

When you reach financial independence, you have the money and you have the time but the motivation is still the thing that could trip you up and it has over the past year or two for me so I plan to get into what worked for me and what hasn’t in future articles but for now I’ll say that habit is the one thing that makes the biggest difference.

If I can get into a routine and I can stick to it, then it makes everything so much easier and then I always go to bed feeling like I did the right thing that day and I feel like I made progress on things that are important to me and it hasn’t been a motivational struggle because it’s routine and it’s normal.

Since my normal day-to-day life is so efficient and focused, that makes me enjoy my vacations more and my trips more so when I go to the States and visit family, I can just relax. And even if I’m not as productive there and if I’m not making as much progress as I would like, at least I know that when I get back I’m going to be making a lot more progress and will be a lot more effective at everything I’m trying to do and that lets me just relax and not feel guilty about it on those occasions when I am somewhere else.

That brings up another point…that’s another reason why I’m trying to limit the amount of trips that we take and limit the amount of fun things that we do because if my whole life is that, then I can’t really feel good about my routine because I’m not doing it anymore.

So it’s been challenging but I feel like I’m making good progress and I’m excited to share some of that with you later in the year in future articles.

I have to say this is a lot different than I expected when I was planning to reach financial independence. I did not think of any of this stuff and it was all the fun things that I was hoping to do like travel and hang out with friends and family all the time and just have the life of leisure and enjoyment. But all that stuff is only really enjoyable when you’re working hard and you feel like you deserve it, like you’ve earned it, so that’s why the focus has really shifted for me this year.

Being a blogger, it’s interesting because you can sort of look back on what you thought you wanted and what you thought you were going to do.

Back in November of 2012, I wrote an article called The Perfect Life and that was an exercise that my wife and I did when we just try to sit down and plan out what are perfect life would look like.

This was a great exercise and it was one of the reasons that Jill, my wife, actually got on board with the whole idea of financial independence.

So I definitely recommend you do it but just know that whatever you think your perfect life is will likely change by the time you actually have the power and the time to live that.

Looking back on that article from 2012, it looks like I did get some of the stuff right but I missed out a lot of things.

My core focus back then was going to be on friends and family, traveling, learning, and creating.

The friends and family thing…absolutely, that’s been great.

The traveling, as I mentioned, I don’t need to do as much of that as I thought I did.

The learning and creating…that is a huge focus and that is something that is been really bringing me a lot of Happiness.

So back then I thought that we were going to live this 3-6-3 plan I called it, which was 3 months living in the States visiting all my friends and family, 3 months traveling somewhere else in the world, and then 6 months living in Scotland and hanging out with Jill’s friends and family.

It’s just amazing how off that would be now!

We tried to travel for 3 months and we realize it was way too long so now I think we’re more one month travel, max.

We also tried to travel and see friends and family in the States for about 2 months and we realized that was way too long too. And it’s not because we didn’t like seeing our friends and family but just not having a home for that long and not having that routine is is just really disruptive. So I think we’re one month max on that side too.

That just means that most of the time we’re going to be in Scotland, which is great!

I did mention in that post that I wanted to spend some time in Thailand, Guatemala and Ecuador and I’m happy to say we hit all those places up since then so that’s cool to see!

The other thing I thought I’d do is create businesses but as I said, when money stops being a motivating factor…you know some of those ideas were just money making opportunities and it’s like, “Well that’s not a really good use of your time, if you know more money is not going to make that big of a difference.”

The other thing that I mentioned in that post was maybe doing a PhD program, which is something I still want to do someday.

I am putting that off to what I’m calling my second retirement, because I feel like there’s so much I want to get accomplished that I still feel like I’m working super hard and I can see a time when it’s like, “Okay I maybe I’ll do a Ph.D program for fun.”

One of my buddies has said that he wants to come over and do a Master’s so maybe I’ll just do it with him for fun.

Then, my proper proper retirement will be being a ski bum on a mountain somewhere and maybe working part time for ski patrol and throwing avalanche bombs and stuff like that.

So what you think you want is maybe not exactly what you are going to want to once you get there so just be flexible, think of other options, experiment, and just have fun with it because that’s really the whole point.

And that brings me to the biggest realization that I’ve had over the last year that I don’t think I had as much in first year…it’s just how good this is and how lucky you are to be able to control all of your time.

There’s been so many times over this past year where I just get this feeling of elation. Really, there’s no reason for it, there’s no external stimulus that caused it…it’s just a moment of pure joy.

Just knowing that you’re in control of your time and knowing that you can do whatever you want and it doesn’t matter if you get kept up late one night because somebody’s noisy in the street or something because you can sleep in the next day, if you need to.

And it’s just these unexpected moments of just pure gratitude that you’re lucky enough to be in this position that you’re in and to be able to live this lifestyle and to have the low levels of stress.

That’s just happened so many times over this past year and a lot more than the first year. I think in the first year I was just really thinking about things and still in the old sorts of mindsets but now it’s just like, this is a new life and I guess every so often I would realize that, “Hey, this isn’t just a vacation or a temporary thing…this is life now and I feel unbelievably lucky to be living it.”

Hopefully this is helpful to you as you’re planning your own departure from work eventually. And hopefully it gives you an idea of where I think the Mad Fientist is heading for the rest of this year and into next year.

I’m going to be focusing a lot on building the lifestyle that you’re hoping to build because I as I said, I’ve had my struggles and I’ve learned a lot about that so I think for the rest of this year there’s going to be a lot of articles focused on that (i.e some of the things that have worked for me and haven’t worked for me) so if you’re interested in learning more about that stuff, then absolutely subscribe to the email list and you’ll get notified as soon as a new article gets published.

There are currently 80,000 people subscribed, which blows my mind, but hopefully that shows that I’m not spamming people and people aren’t unsubscribing.

If you want to subscribe and also get a PDF of all the great advice I’ve received on the podcast over the years just head over to and you can enter email just there and you’ll get a PDF containing tons of great advice I received from all my guests on the podcast over the years.

So that’s what my second year of freedom was like. As they say, time flies when you’re having fun and that definitely was the case. I really can’t believe it’s been two years since I left my job but it’s been a wild ride, it’s been extremely exciting, and I can’t recommend it enough.

For all of you out there who are still on the path to FI and are finding it to be a bit of a grind, trust me…it’s absolutely worth it and all of the things that you’re learning about yourself as you struggle through these times are going to definitely help you build your ideal life once you do walk away from your job.

Thanks a lot for listening and we’ll be back to the normal interview format in the next episode. I have some good ones already recorded that I’m excited to share with you.

See you next time!

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Scott Trench – Set for Life Wed, 20 Jun 2018 09:15:22 +0000 Scott Trench joins me on the Financial Independence Podcast to discuss the three stages of wealth creation on the journey to financial freedom and what you should focus on at each step!

The post Scott Trench – Set for Life appeared first on Mad Fientist.

On today’s episode of the Financial Independence Podcast, I’m joined by the president of and cohost of the BiggerPockets Money Show, Scott Trench!

Scott breaks down the journey to financial independence into three stages and explains what you need to focus on at each step (and why)!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • The three stages of wealth creation on the path to financial freedom
  • Why it doesn’t make sense to worry about investing right away
  • How to create a “financial runway” and use it to your advantage
  • Why you should try to find a “scalable career”
  • How to turn your biggest expense into an income-producing asset
  • The one question to ask before buying your first house hack
  • The multiple benefits of adding side hustles along your journey

Show Links

Financial Independence Podcast Advice

I’ve been recording this podcast since 2012 and at the end of every interview, I always ask, “What’s one piece of advice you’d give to someone pursuing financial independence?”

I’ve received a lot of great answers over the years so I decided to compile all those answers into a PDF, which you can now download for free here!

Full Transcript

Mad Fientist: Hey! Welcome everyone to the Financial Independence Podcast, the podcast where I interview some of the best and brightest in personal finance to find out they achieved financial independence.

On today’s show, I’m excited to introduce Scott Trench from Scott is someone who came on my radar a few years ago because Mindy Jensen, aka Mrs. 1500, from mentioned quite a few times that I needed to get her colleague, Scott, on the podcast. She said he’s a 20-something who’s doing incredible things with real estate and investing and finances in general, so I needed to talk to him. And any time Mindy gives such a glowing recommendation for someone, I definitely check them out. So that’s what I did!

I downloaded an audio book version of his book, Set for Life, and I really enjoyed it. The thing I liked most about the book was that he broke the journey to financial independence down into three distinct stages, each with their own focus. And this is something that I really am looking forward to diving into today in the interview because I think it’s a really powerful way to make the journey to financial independence not as daunting. And I’m also looking forward to exploring some of the strategies that he used personally to get to the stage that he’s at today like house hacking and real estate investing.

So without further delay, Scott, thanks very much for being here. I really appreciate it.

Scott Trench: Well, thank you for having me, Brandon. I’m very excited to be here.

Mad Fientist: Yeah, this is a long time coming. I’m not sure how long you’ve known Mindy Jensen, but I think ever since she got introduced to you, she’s been like, “Brandon, you have to get him on the show. He’s this young guy that’s doing all these crazy things.” So you’re in your mid-twenties, right?

Scott Trench: Yeah, I’m 27. Two or three years ago, I actually [00:01:46] Bigger Pockets.

Mad Fientist: Mindy has been like, “You’ve got to get him on the podcast. He’s doing some amazing stuff,” which I’m really excited to talk to you about. So let’s dive in! What did Mindy see in you do you think? And what caused her to come to me and say, “Hey, you needed to talk to this guy”?

Scott Trench: Well, I think we both share a lot of interest in personal finance. We both have kind of a similar approach to money in general. I think it starts with a basis in frugality, but then there’s an aggressive investing component.

And both Mindy and I are a little bit more—how do I describe it? We try to be a little bit more creative and adventurous with our investment and money management than maybe just passively investing in index funds. I think that’s why we’re attracted to real estate. I have my eye on maybe branching out into some other types of investments. And I do she does a lot of private lending and other various kind of creative ways to invest and maybe get a diversified or different or higher returns than she can with just stocks.

So, I think that’s where our friendship kind of kicked off, a pretty similar mindset on life and finance and real estate in general.

Mad Fientist: Nice! And yeah, you’re 27 and you’ve done a ton of crazy, amazing stuff so far. You’re now president of Bigger Pockets which is huge. Congratulations to you!

Scott Trench: Yeah, I got promoted to president of Bigger Pockets maybe last Tuesday I think. I don’t remember. It’s been a whirlwind since then.

So, it’s kind of the opposite of FI at this point. I’m now working very long hours and trying to figure out how to grow the company and all that kind of stuff. But it’s very exciting, and it’s like the perfect world for me because I just love Bigger Pockets. I love helping spread the message of financial independence to as many places as I can.

Mad Fientist: And you could do it while you’re on the clock.

Scott Trench: And I do it while I’m on the clock.

Mad Fientist: …which is great. And your boss was on the show, Josh Durkin. He was episode #23.

Scott Trench: That’s right.

Mad Fientist: He seems like a good boss anyway. But that’s awesome. That’s great. Congratulations!

Scott Trench: Yeah, Josh has definitely kind of achieved the dream here. So he’s stepped aside. He has some family things that are going on. So we’re wishing him the best with those. But he’s definitely in a position where he’s able to step aside and step out of the day-to-day and have a young upstart like me kind of do some [00:04:01] for him.

Mad Fientist: That’s cool! So how did you get interested in real estate?

Scott Trench: So, I got interested in real estate as a byproduct of being interested in financial independence in the first place. I started out working at a Fortune 500 company. I wasn’t really interested in that line of work. I was interested in that line of work, but I didn’t want to be tied to it for 40 years.

So, as part of my effort actually to become a better financial analyst at my job, I started listening to and reading all these content on finance and kind of discovered the concept of personal finance at some point. And then, I actually stumbled upon your podcast, the very first episode, and Mr. Money Mustache. And once I heard that, everything clicked for me, and I was like, “This is it. This is what I need to be doing and how I need to be moving forward with my life and with my finances. This is why”—I was already fairly frugal—“This is why I’m saving. This is what I want to do with money. This is why I studied finance in general, in college and with the start of my career. This is it!”

So, thank you for that. Thanks to both of you and him.

Mad Fientist: Yeah, that’s absolutely crazy!

Scott Trench: But yeah, that interest in personal finance is kind of what spurred my ability to save and the accumulation of my first $20,000 to $25,000 for me. And I wanted to do a little bit more than maybe invest in index funds again which is kind of a standard 8% to 10% long-term average return. I wanted to try to see if I could do much better than that. And that is where I became interested in real estate and started listening to Bigger Pockets and becoming a fan of the company there.

Mad Fientist: That’s very cool! I published that episode way back in May of 2012. So, do you think you stumbled upon it shortly after it was published or was this something that happened a little bit later.

Scott Trench: No, in May of 2012, I was graduating from college and getting ready to—no, I graduated college in May of 2013. So I was still drinking way too much better and trying to have too much fun when you published that.

So, I spent all my money throughout the rest of my college, all the money I saved up working in summers and all that—all fun in college, and then a three-month backpacking trip when I graduated. So I started with basically zero—$3000 in savings when I started my career.

But within three months of starting my career, my introduction to the real world, I became very interested again in the concept of personal finance. And that’s when I found your show, some time in that timeframe. I want to say it was probably November or December of 2013 is when I actually listened to your show and got this all kicked off.

Mad Fientist: Wow! That’s very cool. So you mentioned your first $25,000. And this brings up a really cool thing that I liked in your book, which I haven’t even mentioned yet. But you wrote a great book called Set for Life. And you’re kind enough to send it to me. I actually enjoyed the audio version of it in the gym. So you were my gym companion for a good week or two.

Scott Trench: Oh, wow! I’m repaying the favor [00:06:47].

Mad Fientist: Yeah, exactly. So yeah, I really enjoyed it.

But one of the things I loved most about it was how you broke it down to three phases. And the first phase was getting that first $25,000. The next phase is getting that first $100,000. And then, finally, the next phase is getting from $100,000 to financial freedom. So I really like how you structured it.

So, would you mind talking a little bit about that first stage?

Scott Trench: Yeah, sure. So one of the problems that a lot of people have I think when it comes to finance is they’re unable to take any risk whatsoever. They’re unable to take advantage of opportunity. And the reason for that is because they have no cushion. They have nothing to fall back on.

Suppose that you’re making $50,000 a year, if you save $500 a month—which is actually a pretty good savings rate. It’s about a little over 10% of your savings—that means you spend around $4000 a month. So you’re not going to be able to even last one month without your job if you’re starting from scratch until eight months have passed and really six weeks timeframe by the end of the year. So you have no financial runway. If you lose your job, you’re screwed! You run out of money and you have to go and find similar paying work as your only option.

But if you’re able to start increasing that savings rate, you accumulate this cushion, this what I call “financial runway” and “set for life” which allows you to live without the need for wage-paying work on that.

And my book is written for a very specific audience. It’s written for a median income earner that is starting with little to no assets but wants financial freedom.

So, some people are starting from a position where they already have a good $25,000 saved up through whatever fortune, whatever they’ve done previous to this point. But if you’re starting from that point, you don’t really have the option of going out and starting a business because you’re working full time and starting a business is hard work and unlikely to be successful on a part-time effort in the short run. There’s plenty of exceptions to that, and I’m not discounting that. I just think it’s lower odds of success than maybe focusing on savings first.

You’re also not likely to get a big raise at your job at work within the next year. People doubling their income in a corporate type situation, it’s not heard of. It’s unlikely. Also, you have nothing to invest, so you can’t get a higher return on your invested dollars if you have nothing to invest.

So, you really have to start somewhere. And I think for that median income earner starting with zero, it’s with that savings position.

Now, once you achieve a high savings rate and accumulate maybe six months to a year or more of this financial runway, options begin to present themselves in your life, things like you can go and take a job that pays you $40,000 instead of $50,000, but offers you a chance at a big bonus at the end of the year, or you can go work for free for an entrepreneur that you really admire and go learn a valuable skill set, or you can just take that $25,000 and invest or house hack the way I did.

And that’s kind of where we start getting into part two there which is $25,000 to $100,000. But do have any other questions about the…

Mad Fientist: Yeah, yeah. That’s awesome. And yeah, the main focus in that first $25,000 is frugality, which as you talked about in the book, a dollar saved is better than a dollar earned because obviously you’ve already paid tax on that dollar that you’re saving, and it’s worth more to you than a dollar earned because you would pay a bunch of tax on it and have to do work to get it. So, I think that’s really important.

And I think focusing on frugality at that stage absolutely is going to be the biggest impact you can have on your finances.

Scott Trench: Yeah, and I think a dollar saved is better than a dollar earned because of that tax advantage. But also, a dollar saved, at least a dollar of lifestyle—you know, if you can reduce your average monthly spending by a thousand dollars, that’s better than increasing your average monthly income by a thousand dollars for a couple reasons.

One, you’re accumulating that all in savings which is 100% gain because it’s after tax savings that you’re accumulating. But two, you’re decreasing the amount of money that you need to produce financial runway.

So, you might need $25,000 in total cash, liquidity, to finance your $2000 a month lifestyle. But you’ll need about $48,000 to finance your $4000 a month lifestyle. So it gets harder to save, and you need way more the more your average monthly spending increases.

Mad Fientist: Wow! Yeah, that’s a great way to look at it.

So, you had mentioned when you hit that $25,000 stability level, you would mention you could get a job that pays less salary but has a bigger bonus potential, or you could go and work at a startup or things like that. And you mentioned in the book something called scalable careers, which that’s a great phrase that I don’t think I’ve really heard before. So can you talk a little bit about that?

Scott Trench: Yeah. So my first job was at a Fortune 500 company as a financial analyst 1. And I knew very clearly that around the 18-month mark, give or take a few months depending on my performance, I was going to get a promotion to financial analyst 2. And my salary when I started was $48,000. And I knew that my salary at financial analyst 2 would be about $56,000 to $58,000 (again depending on performance).

Well, my goal was financial freedom. And I wanted it as soon as possible. Earning an $8000 raise after a year is great. I know a lot of people that would be happy with a raise of that level. But that was not going to get me expediently towards my goal of a several hundred thousand to a million dollar net worth and several thousand dollars a month in passive cashflow. So that’s not scalable.

And that the step after financial analyst two of course is financial analyst 3, then senior financial analyst, then finance manager, senior finance manager, director of finance, senior director and so on, all the way up to CFO of a Fortune 500 company.

And that’s the best case scenario, is that you go through all of those rungs of the ladder in 20 years. That’s not fast enough. It’s in my opinion as a saver who was able to accumulate a year of financial runway within a year, that was a risky career because I knew that I was not going to have any chance to live up to what I deemed my potential to be.

But on the other hand, if I wasn’t saving, if I had no financial runway, it would be too risky to leave. And so what I’m trying to do with Set for Life and with some of the other things I’m doing is try to help people put themselves into a position where they’re saving enough, where leaving a career track like that where they have very limited upside becomes the bigger risk than taking a chance on something that they believe to be a good opportunity.

Mad Fientist: And that’s why I love these three distinct phases so much. When I started on the road to financial dependence, thankfully, I was already in stage three. I was just working towards that financial freedom. But I didn’t realize that passing those first two stages, my first $25,000 and my first $100,000 gave me so many more options and so much more power to make that journey quicker and more enjoyable.

And that’s why I really like how you laid out the book, is because it’s like, “Okay, you may not have that much money to invest and you may feel like it’s a long way out. But you get to this $25,000 or this one year of runway, and now you have a lot more options. You could drastically change your life for the better.

Scott Trench: Yeah, I think that’s exactly right. And once you have that financial runway, moving into step two here, we’re trying to get to about $100,000 in investable liquidity. And once you get to $100,000 in investible liquidity, now how you invest that money begins to become really important.

So, the goal is to go from a year of financial runway—which is a very modest goal that you can grind out over maybe a year to eighteen months depending on where you’re starting from, what your income is, and where your expenses are, to a goal that has a lot less certainty. There’s a lot more factors. More luck is involved in rapidly going from $25,000 to $100,000 than there is from going from zero to $25,000.

And so, it’s all about increasing your odds of success I guess at this point.

And so, I believe that two things are likely to help people increase their odds of success going rapidly from $25,000 net worth to $100,000. One, go find a new job. Go find a career or an opportunity that you believe offers you the potential to scale, but will not allow you to lose money on a monthly basis. And then, two, house hack.

Mad Fientist: Cool! Yeah, can you describe that again? I know I’ve had Chad Carson on the show, and we’ve talked about it in the 1500s. But for those who may not have heard that episode, could you just describe what house hacking is?

Scott Trench: Sure! So, house hacking as I define it is buying a piece of investment real estate that will make sense as a rental property, as a cash flowing rental property for you after you move out; or otherwise, using your housing to build wealth.

So, for example, a house hack the way I look at it through my lens was I bought a duplex for $240,000 here in Denver in about late 2014. I put down $12,000. And I got a $236,000 loan, something like that after the fees and all that.

And so, I put down 5% with an FHA loan. My mortgage payment was $1550. And my rents were $1150 from the other side and $550 for my side. So if you’re following that, I was collecting $1700 in rent on $1550 mortgage.

Mad Fientist: Nice.

Scott Trench: So, after the other expenses that went into maintaining the property and fixing some things up myself, I was probably breaking even or maybe paying a little bit out of pocket to live on a monthly basis. But that’s a huge improvement from paying hundreds or thousands of dollars in rent per month.

And so, that’s the biggest hack that I can think of, like the biggest trick that a median income earner can do on the side to drastically cut their expenses, and then automatically put yourself in a position to have a significant cash flowing asset after a year or two.

Mad Fientist: Yeah, you mentioned in the book, you’re like, “Turn your biggest expense into an income-producing asset,” and I think that’s really powerful to think of it that way. Yeah, this could be your biggest expense—especially if you’re renting or if you go out and buy your dream home right out of college like some people. that is a huge expense. But what you’re talking about is turning that into an income-producing asset instead. So, not only are you not spending money on that big, major expense, but you’re actually earning money from it which obviously is going to get you to that $100,000 a lot quicker than the normal person.

Scott Trench: Yeah, absolutely. I mean when you talk about average American household spending, 33% of that, the biggest chunk of the pie is going to be in housing, 17% is in transportation, 13% is in food. And then, one-third—that was two-thirds I just described there, housing, transportation and food—one third is everything else. Fun, entertainment, healthcare, insurance, all of that falls into that last third.

So, people always think that that’s where they need to focus on their finances in order to achieve a high savings rate and rapidly accelerate toward financial dependence, but that’s wrong. It’s just that the math doesn’t work like that. The math is telling us that the biggest parts of your spending are in housing and transportation. And if you can house hack—like me, I house hacked close to work, so I could bike to work—you’re able to eliminate basically 50%, lop off half of your expenses, in one single investment.

And again, yes, you’re buying in such a way that it will make a smart cashflowing asset for you once you move on and move out of that property.

Mad Fientist: Very cool! So was that your first property then, the duplex in Denver?

Scott Trench: Yeah, that was my first property. I bought it in northeast Denver, and things worked out. I moved out a couple of years later. And it currently rents for $1400. The mortgage is currently $1400 because I refinanced. I was able to reduce my monthly payments. And then, the rents are about $2600 a month.

Mad Fientist: Wow! That’s fantastic. Have you bought any other property since then?

Scott Trench: I live in another duplex doing the same thing. And I also have a quadplex now that I bought as a regular investment property.

So, I’m trying to buy one every 12 to 18 months and just sustain that system.

Mad Fientist: How is that going in Denver? I know it’s a really hot real estate market these days.

Scott Trench: It’s been going pretty well. I think that it’s increasingly difficult. At the time that we’re recording this, I’m finding it very difficult to find properties. I think it’s going to take me a good bit of time here. But as long as I can find a property that cash flows in a sense where I basically have a very, very good odds at having long-term $500 to $800 a month plus in cashflow on a $50,000 to $100,000—it may not be the best cash in cash return, but I do believe that I can see some solid appreciation over a 30-year holding period in Denver.

So, if I kind of maintain my system of dollar cost averaging through real estate, I believe that I’ll have a good result at the end.

Mad Fientist: Very cool. And how does the duplex compare to the quadplex?

Scott Trench: So the quadplex that I purchased, I bought it for $355,000. It wasn’t in the nicest area. The rents there are $800 per month on each of the units. And the mortgage is about $1700.

So, if you’re following, that’s $3200 in rent on a $1700 mortgage. And I have a couple of other expenses there as well. I believe I currently was able to get—I remodeled and got one of the units up to $925. And I believe that by the end of next year—so that’s the end of 2019—that I’ll be able to get approximately $925 to $1000 per unit, plus I can pass on the utility fees to the tenants.

So, it’ll take me a year or two to get to that point because I don’t want to kick any tenants out or anything or raise the rent too quickly on them. But once I’ve got that stabilized after a year or two, I think I’ll have a very, very nice cash flow on top of what is already a satisfactory cashflow.

Mad Fientist: Alright, good. If somebody is interested in getting started in house hacking, what would you recommend as far as getting duplexes? Are they easier to manage initially? Or do you think go straight for something like the quadplex if you have the capital to invest?

Scott Trench: One of the great things about house hacking is it’s a huge spectrum. So the only criteria that I have that I think that you should really kind of strictly enforce is: “Will this property make sense right now?”, the day you buy it as an investment property if you don’t live there. If you don’t have that option, then you are stuck. You have to live there until things appreciate or rents go up, or the property goes up and you either have to be able to sell it or live there happily.

But if your house hacking correctly, you have three options. And this is the real power of it in a non-financial sense. I could continue living in that property happily forever, I could sell it at a gain alongside all the other homeowners in the area, or I could rent it out.

And in a good market, that’s not so important. But in a bad market, it’s really important because in a bad market, you can’t sell. And so, if you can’t sell, then your only option as a homeowner or a house hacker that hasn’t bought a property that would make sense as a rental is to continue living on the property and paying it.

But if it can cashflow as a piece of investment real estate, then you can always decide to continue living there or keep it as a cashflowing rental. Who cares if it’s underwater in terms of you owe more than it’s worth as long as it’s cash flowing? It’s putting money in your pocket every month.

Mad Fientist: Yeah, absolutely. So, Bigger Pockets obviously has tons of amazing resources for people who want to get into stuff like this. Are there any links in particular you’d recommend? Or maybe you can just send them over, and I’ll put them in the show notes in case people want to know more? And

Scott Trench: Sure! I’d recommend people start from the source. So, the first time that I can figure out anybody actually using the term “house hacking” was by a guy that works here named Brandon Turner. And he wrote How to Hack Your Housing and Get Paid to Live For Free. He uses the example of a quadplex I believe in that post. But I’ll be sure to send you that link, so listeners can go ahead and click on that in the show notes.

Mad Fientist: Perfect! So, that was your first $100,000. The first $25,000 was focused on frugality and cutting expenses. The next $75,000, you’re looking at housing and income generation. So do you want to talk about that final step?

Scott Trench: Yeah, sure. So, the final step I think is it goes on forever basically. I think that the two things that come into play there are going to be entrepreneurship, asset creation, and then investing.

So, once you have a hundred thousand dollars in investable liquidity, if you’re spending less than $25,000 or $30,000 a year, by definition, that means you have years of financial runway, years of the ability to go and take advantage of opportunities, or just simply the cash to make a meaningful investment, at least relative to your spending.

So, I think there’s a couple schools of thought. First, there’s the traditional. And there’s nothing wrong with this plan of index fund investing. Throw all your additional cash into index funds, model it out using whatever percentage return you’re comfortable with. A lot of people will go with something in the 8% to 10% return range for index fund investing over the long term. But you model it out, and you just throw all of your excess cash into a big pile. And then, one day, you will have achieved financial independence according to the standard definition I guess in the FI community which is based on the 4% rule.

So, if you spend $40,000 per year, if that’s your target goal, and you have $1 million in index funds or wealth in general in your portfolio, you’re likely to sustain that in perpetuity.

So, that’s one plan. And there’s nothing wrong with that plan. I invest in index funds. I have a very sizable chunk of my money in index funds for that exact reason.

Another approach that I also use is real estate investing. So, alongside kind of dollar cost averaging with index funds, I try to dollar cost average—and by that, I mean consistently invest, so I’m not buying at the top or the bottom of the market—in real estate.

I just mention I have the three properties. I plan to buy a fourth by, if not by the end of this year, by the end of 2018, by at least kind of spring 2019 to just kind of continue my system. I bought my last property in June 2017.

So, those are two approaches for investing.

But there’s also this whole realm of entrepreneurship. And I encourage people to go out and think about adding side hustles one at a time as they’re going down this path. There’s so many different ways to make money that don’t cost anything but your time, and maybe a few hundred to a few thousand dollars to try out.

You could try starting a blog or a podcast. I mean, that obviously worked out for you, Brandon.

Mad Fientist: Right! Yeah, no, absolutely. I couldn’t agree more. This is like the most opportune time for low cost entry into any sort of business world you can imagine which is super exciting. And I couldn’t agree more that also should be a very important focus for you because if you just work so hard to financial independence, and then have nothing to work on after, nothing that gets you out of bed or gets you excited about starting your day once you reach that point, you’re going to probably be pretty miserable and may want to go back to work.

But having that thing that you’re working on as you’re trying to reach financial independence, then hopefully, by the time you reach it, you’ll have something there that you’re really passionate about and that you can spend a lot of time doing.

Scott Trench: Yeah, I think that’s huge. It’s kind of a funny phenomenon to me because when I was starting out on this journey, all I could think about was getting to a point where financial independence seemed like a realistic possibility. And now that I’m there, I guess I technically lean FI, but I have more work to do if I want to get to the point where I can support maybe an upper middle class lifestyle in a good school district and a family one day. I definitely still have some work to do to get to there.

Mad Fientist: Wait, let me interject. I was listening to your podcast (which we’ll obviously talk about here soon as well). And yeah, your last name is Trench, and you want how many trenchlings?

Scott Trench: Seven to ten trenchlings.

Mad Fientist: So yeah, that could take a nice chunk of change. So yeah, you better keep saving a little bit because 7 to 10 trenchlings, I’m sure, aren’t going to be too cheap.

Scott Trench: Yes. So, I definitely have some higher financial goals than kind of like lean FI for me and maybe like one significant other. And I’m plenty happy doing what I’m doing and kind of continuing along with things.

But it’s funny because I hear these people, they’re like, “Oh, I’m very well into FI. I’m easily a 2% or 3% safe withdrawal rate,” which is much more conservative than the 4% safe withdrawal rate, which means they have much more assets than they need to produce the level of income that they desire. And they’re just like, “I don’t know what I’m going to do after I retire.” The money is not the fear anymore. The leap and I guess the freedom is almost kind of the scary thing.

So, I think that you’re absolutely right to have a passion project, whether it’s personal finance-related stuff or a podcast or a blog or a project or a business in something else that you just want to work on with your free time.

Mad Fientist: Yeah, absolutely. So, it sounds like you haven’t made any sort of mistakes or you’ve been on such a very amazing path seemingly as soon as you got your career? Have you made any mistakes, or is there anything you would do differently if you’re starting from scratch now?

Scott Trench: Yeah, you know, I had the good privilege—and this is not like an intelligence thing. I had the good privilege to discover this personal finance movement and have it make sense to me very early on, and then just kind of dive in or read it. So I was able to basically—from a big picture perspective, I think that I’ve been able to at least avoid any major mistakes.

So, my major mistakes are going to be things like I bought a brand new Toyota Corolla in 2014, kind of before I really wrapped my head around the whole personal finance thing. And that’s a Corolla. It’s not like I bought an [00:29:20]. It cost me $1700. And I still have a little bit to go to completely pay it off. It’s like a 1% interest rate. But that wasn’t a huge mistake.

I picked stocks, and I tried to invest in stocks, and I lost money in 2013 and 2014 when everybody else was making money. All the index fund investors were seeing strong returns. I managed to lose money because I knew better than the market about this couple of Chinese stocks that had more cash than market cap… and I don’t know…

Mad Fientist: Oh, nice. So they’re not even recognizable by name, the companies?

Scott Trench: No, I was just finding these weird financial ratios.

No, here’s what I was thinking. I was like, “Oh, I’m a smarter guy than the market.” This company in China is a Chinese fruit juice company. And they’ve got a hundred million dollars in cash and no debts. And their market cap is $50 million. And they’re profitable.

I mean, if you think about that, how on earth is their market cap less than that? Well, the reason is because Chinese companies all the time—I don’t know about this one in particular—lie about their financials. And no one can go in and audit them and figure that out. And everybody knew this except for me. So that’s how I managed to lose money investing in stocks I guess.

Mad Fientist: Nice! It’s good to make those mistakes early. That’s another good thing. You don’t have to be a superstar investor when you don’t have much to risk luckily. And that’s hopefully when you make all your mistakes and learn all those lessons.

Scott Trench: Yeah. So, I think that from a big picture standpoint, I was able to think about it in a pretty rational way and have the odds in my favor for success. Some of it is obviously also luck. And I think that goes right along with what I just said before, it’s about increasing your odds of success, but understanding that some things are out of your control alongside that.

Here I am today after a string of I think good decisions and good fortune accompanying them, but I look back, and I’m like, “I’m not sure which one of those was a bad decision where I got lucky.” I think they were good decisions and I got lucky if that makes any sense.

Mad Fientist: Absolutely!

Scott Trench: And particularly in terms of appreciation and real estate and stock markets.

Mad Fientist: And I really think you make your own luck too to an extent as well. Obviously, some chance plays a part. But when you’re putting yourself into a position to take advantage of opportunities, and you do have options, and you do have that buffer (like that first $25,000 that we talked about), and you’re able to take advantage of things that other people can’t, and then yeah it may look lucky after the fact. But I think a lot goes into putting yourself into position to be lucky.

Scott Trench: Yeah, I rarely do this, but I just read a book that I’m raving about lately called Thinking in Bets by Annie Duke. And she’s a poker player.

Poker players, at least the ones that are really good, have this really good outlook on things where they’re like, “Hey, here’s the hand I’ve been dealt. My odds of success of winning this hand based on what I know are 70%. And I think I can read my opponents as well as I can to feel comfortable with those odds and set myself up. I’m going to bet on that and go with that.” And that’s the correct decision to make in that game. And they’re fine with that.

And if they lose, you’ve got to be able to not tie the result of losing that hand with “Hey! Oh, that was a bad decision to bet there.” No, it was a good decision. You made the right choice. It just didn’t work out. And if you continue along that line of thinking and apply it to your life, I think that’s how you have just really good odds of hitting success.

Now, of course, you can’t make any bets in the first place if you have no wealth and spend all that you earn. You have no ability to even attempt to put yourself to put some money on that or take the shot on that new career or whatever. So you have to have some baseline of stability, and then work as hard as you can to acquire excess so that you can then go on to take these chances in life that you believe, to the best of your ability, are great, and then obviously do whatever work you can to increase the odds as much as you can to your favor.

Mad Fientist: Very cool! I’m going to put that book in the show notes, a link to the book in the show notes. And I’m going to hopefully get it out of the library as soon as I can because that sounds really good. And yeah, back in my poker-watching days, I remember Annie Duke very well. So that would be cool to read that.

So, I mentioned your podcast briefly, but I definitely want you to talk about it because your co-host is one of the people that has been on my show probably more than anyone else. I interviewed her and her husband in episode #14. She and her husband interviewed me in #26. And then, they both were co-hosts on my show with me on episode #38.

Scott Trench: There were some rapping involved in that show.

Mad Fientist: There was! And that is my question. So, yeah, Bigger Pockets Money Podcast. That’s great. I’ve listened to probably half of the episodes so far. And I’m looking forward to checking out the rest. Your first guest was the same first guest that I had way back in 2012, Mr. Money Mustache (which was a great episode).

So, my question was, “Has she rapped yet?” because she is actually a really good rapper.

Scott Trench: You know, she hasn’t wrapped yet. I think I take all of the thunder for the weird or funny, whatever you want to call it, activities there by telling very lame, bad jokes on each episode, or asking the guests at least.

Mad Fientist: Yeah, yeah.

Scott Trench: But we’ll get her to rap on one of the future ones coming up.

Mad Fientist: Absolutely! She’s good. So yeah, the Bigger Pockets Money Podcast, how has it been going? Have you enjoyed it?

Scott Trench: Oh, I’ve love it! So, the Bigger Pockets Money Show started as kind of a spin-off, an alternative to the Bigger Pockets I guess real estate podcast. And one of my, and I think Mindy’s, big petpeeves with the real estate community is that a lot of people will go in and try to buy real estate and hope that buying that real estate will solve their financial problems. So they’re investing from a position of financial weakness and using some form of creative finance which is kind of, for a new investor, often a code word for “extremely risky leverage” and not investing from a position of financial strength.

So, the goal of this show is to say, “Hey, real estate is one part of a strong portfolio.” And I believe it makes sense for many people. But really, what we’re after here is a strong personal financial position with a good savings rate, a strong income, strong investment returns, and then the opportunity, if desired, to go take advantage of entrepreneurial pursuits.

So, we are interviewing people that have expertise in one of these areas or niches in these areas or stories that embody this kind of approach, so that people are not pigeonholed into one type of investing or one type of real estate.

So, for example, on a basic level, Mr. Money Mustache has an incredible intro because I believe—and Mindy agrees—that the basis of personal finance, the foundation, is always in that frugality and having the mindset of the end goal of happiness and using money as a tool to live out that ideal lifestyle I guess.

And then, we kind of move into more niche topics with future guests. For example, we had Erin Chase on there. And Erin Chase is an expert grocery shopper. And groceries are one of the things that a person that’s interested in personal finance can go out and make a change in immediately. You may not be able to change your lease, you may not be able to start biking to work tomorrow. But you can next week go to the grocery store, plan out your meals, and save a few hundred bucks on your eating bill—and eat healthier and bring that advantage into your life.

But then we go into house hacking. We go into just incredible personal stories. One of my favorites which will be coming out soon is with David Greene who’s a real estate investor. But we don’t talk about his real estate investing, we talk about his personal financial journey where he started as a waiter and found ways to make way more money than all the other waiters at the restaurant, how he saved all that money, how he was able to house hack, how he was able to parlay into his career as a police officer, how he was able to save and accumulate tremendous amounts of wealth while most of the people, most of his peers—and this is in San Francisco. This is in an expensive market—were not able to accumulate anything.

So, the goal of the show is to showcase these different perspectives on finance and enable people to think outside the box of “Oh, real estate is the only way to go about this” or even “Index funds is the only way to go about investing” or “frugality is the only path to financial freedom.”

No, all of these things work. And it’s about putting together a plan that makes the most sense to you based on the perspectives of smart people who have been there and that resonate with you.

Mad Fientist: Very cool! Yeah, I’ll put a link to the first episode in the show notes. And I definitely recommend everyone to check it out.

So, I always end all my interviews with one piece of advice you’d give to somebody who’s starting on the path of FI. So what would yours be?

Scott Trench: Get to a 50% savings rate. I think a 50% percent savings rate kind of—get to a median income, and then get to a 50% savings rate. I think that once you have a 50% savings rate on a median income or greater, that’s when all of this kind of really starts falling into place and the opportunities begin multiplying in so many different directions for you.

Mad Fientist: Excellent! Well, thank you so much for coming on the show. This has been awesome. And thanks to Mindy for putting this together. She was right! It was definitely worth talking to you—lots of great advice.

And if people want to find you, where’s best to find you online, just go to Bigger Pockets?

Scott Trench: Yes. I’m on a lot of social media, but I don’t ever check them. I find social media very overwhelming. So the best place to find me is actually on Bigger Pockets. Just search my name in the search bar, Scott Trench. If you message me there, I usually get back to everybody within a day or two.

Mad Fientist: Very cool! Well, thank you so much, Scott. I appreciate it. And hopefully, I’ll make it out to Denver one of these days and say hello. I’ve never been to Colorado, and I love mountains. So hopefully, it will happen.

Scott Trench: Well, thank you, Brandon. If I ever make it out to Scotland, I’ll have to come and check it out.

Mad Fientist: Absolutely! You’re welcome any time. Alright, man, thanks a lot. Congratulations again on the promotion and the book. And yeah, hopefully, I’ll speak to you soon.

Scott Trench: Thank you so much.

Mad Fientist: Alright, buddy, bye.

Scott Trench: Bye.

Mad Fientist: Hey, I hope you enjoyed that interview with Scott. Before I go, I just wanted to remind you that I went back through all of my previous episodes and collected the answers to my final question that I always ask: “What’s one piece of advice you’d give to somebody on the path to financial independence?” And I put all the answers into a free PDF that you can download.

So, if that’s something you’re interested in, head to That’s You can download a free copy there. And it contains all of the answers I’ve received since I started this podcast back in 2012. So there’s a ton of great stuff there.

Anyway, thanks a lot for listening. And I’ll see you next time.

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Marla Taner – Striving for Happiness After Early Retirement Wed, 09 May 2018 01:50:23 +0000 My friend Marla joined me on the Financial Independence Podcast to talk about the effort necessary to find happiness and contentment after early retirement.

The post Marla Taner – Striving for Happiness After Early Retirement appeared first on Mad Fientist.

My good friend Marla Taner joined me on the Financial Independence Podcast to go deep into some early-retirement topics that aren’t often discussed.

Marla and I met in 2014 at Camp Mustache and we’ve had a lot of fun (and sometimes heavy) conversations over the years so I thought it’d be great to record one for the podcast!

Listen Now

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  • Stream audio file here
  • Download MP3 by right-clicking here


  • How to deal with a sudden early retirement
  • Rethinking travel after leaving work
  • Finding happiness from within
  • Dealing with losing career identity and external validation
  • How to care less about “success”
  • The effort of happiness
  • Focusing on progress rather than the end goal
  • Doing the work to figure yourself out
  • Justifying the decision to retire early

Show Links

Financial Independence Podcast Advice

I’ve been recording this podcast since 2012 and at the end of every interview, I always ask, “What’s one piece of advice you’d give to someone pursuing financial independence?”

I’ve received a lot of great answers over the years so I decided to compile all those answers into a PDF that you can download here for free!

Full Transcript

Marla Taner: We’re not going to talk about that!

Mad Fientist: Oh, we’re talking about it. It’s coming up.

Marla: Oh, no! I’ll just look like an asshole.

Mad Fientist: Quite right… quite right. I still haven’t recovered from it.


Mad Fientist: Hey, what’s up everyone? Welcome to the Financial Independence Podcast. The podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence.

I’m excited to introduce my guest today. But before I do, I have something to give you guys. If you listened to episode #40 of the podcast, you’ll know that my brother is over here, visiting. He was taking a little mini-break from work. And since he was here, and didn’t have a job, I was trying to think of something I could give him Mad Fientist-related that I could pay him for. So I thought it would be really cool if we went back through all of my old podcast episodes and extracted all of the best advice from those episodes.

As you probably know, at the end of every interview, I always ask my guests, “What’s one piece of advice you’d give to somebody on the path to financial independence?” So my brother went back through all the episodes since 2012 and he wrote down all those pieces of advice. And I put together a nice PDF. And it’s free!

So, if you are interested in getting that, just head over to, and you can get a copy of that and check out all the great advice I’ve received on the Financial Independence Podcast since 2012.

For today’s show, there’s even more good advice to come. I’ve invited my good friend, Marla, on the show. And Marla doesn’t have a blog, but she’s really involved with the FI community. I’ve met her a few times at various FI events. And I know she goes to Camp Mustaches. She’s been to Chautauqua. She’s been to some Camp FI’s. And so, if you’ve been to any of these events, there’s a good likelihood you’ve met her.

But we’ve had some really interesting chats over the years. And I wanted to try to capture one of those for an episode of the podcast. Luckily, she agreed to come on, and we had a really deep conversation about life after FI and the challenges that you face that you may not expect.

We dive into a lot of really important topics that aren’t often talked about that are related to early retirement and financial independence. So, without further delay, Marla, thanks very much for being here. I appreciate it.

Marla: Thanks for having me. Nice to talk to you!

Mad Fientist: I know this is a big treat. We go back to—when was it? Maybe 2013 or 2014? When was the first time we met?

Marla: I think it would have been 2014 at Camp Mustache.

Mad Fientist: That’s right, yup! Camp Mustache. That was my first one. And we met I think the day before the actual camp because you were good friends with Mr. Money Mustache by that point.

And if I remember right, I travel hacked to you right before we met. Do you recall that story?

Marla: Brandon, I’m very unhappy that you’re bringing that up so early in our conversation. Let’s just say that you cheated.

The last upgrade available at the hotel that we were all staying at, and I had recommended that we stay at…

Mad Fientist: That’s true, yeah. So, Mr. Money Mustache and I were sharing a room, and you’re sharing a room with our friend, Colleen. We got there first. And as we talked my way into this amazing two bedroom, two bathroom suite, so we each had our own rooms and a beautiful living room, you guys got stuck in two double beds or something?

Marla: I don’t want to talk about it.

Mad Fientist: So, we go way back. We’ve been friends ever since then. We had a fantastic time at Camp Mustache. And we’ve been friends ever since. And I’m so excited that you agreed to come on because you’re not a blogger, you haven’t told your story, and it’s an incredibly interesting story.

So, for people that may have not met you at one of these FI events, could you just give a little bit of your background and talk about how you retired four years ago?

Marla: Sure, thank you. I do take that as a little bit of a dig that I don’t have a blog because it’s been on my list, but it may not ever happen. But now I could just tell my story to you. So that’s great.

Mad Fientist: I retired kind of accidentally. I had always been frugal, and I was saving money. I did have a fairly high-paying career, but I’ve been frugal from birth basically. And I had just been saving my money but not knowing what I was saving it for. And when I did forensic accounting to look back and see, “Hey, why did I become FI without really trying?”, I realized that without knowing I was on the path to FI, I had just been doing all of these things.

So, I had always saved about 50% of my pay when I look back at it. I always had roommates. I never bought a brand new car. My parents were kind enough to help me with a house hack, which it would have never been called that at the time. But they bought a house that I managed with renting out to five roommates all through college. And I never inflated my lifestyle.

So, I guess I basically retired at 43. I figure I worked about 15 years, saving at 50%. And you’re the math guy. So I think that’s how it all worked out.

Mad Fientist: So, when did you realize that that was possible.

Marla: Well, I did have a “series of unfortunate events” I guess, to quote the book where I lost a job. I kind of had time for soul searching.

And so I guess during that time I was reading/researching, I stumbled on Mr. Money Mustache. And it changed my life. And then, I went to the first Chautauqua in Ecuador basically to meet him and to meet Jim Collins from JLCollinsNH because his stock series have really helped me. And so I just went there with my numbers and said, “I think I might be done. What do you guys think?” And they said, “Yeah, you’re done.”

So, I came home retired!

Mad Fientist: Wow! So, what was it like when you realized that you could retire? And if you hadn’t been thinking about it for years, building up to it and planning for it (like a lot of people are now who maybe have read Mr. Money Mustache since 2011 when he started and things like that), how was it just being plopped into retirement?

Marla: Yeah, I think ‘plopped’ is a good word. I think I was the happiest—like it was instant happiness and gratitude and sort of waking up with like a smile on my face thinking, “I don’t have to do anything. I have no deadlines, no schedule, no routine.” But at the same time, I also had no plan.

So, I always tell people it just feels like this—I always use the word ‘luxury’ because what could be more luxurious than having time to figure it all out? So, I feel really lucky. I feel like it was challenging, and I haven’t necessarily used the time as well as I wish I had. But it has evolved.

It’s been four years. And so I think a lot of writing has been done. One of the writers I like the best on this topic is LivingFI—it’s kind of an awkward name. He calls himself Doom. He no longer blogs which is a bit of a pattern with people who are already FI. They find other things to do and they stop blogging.

But he wrote some really brilliant things about how to come to the decision and the One-More-Year Syndrome and also the realities of what it’s like when you actually do pull the plug. And so he talks about a detox period and that that’s important for everyone. And I feel like I’ve been on the longest four years of detoxing without knowing what you’re doing. It’s a little bit silly.

But just in the last year and a bit, I would say I feel so much happier. And even happiness isn’t the right word. I’m more content and more comfortable in my own skin and comfortable to just be and not feel like I have to answer.

Everybody always asks the question like, “Well, what do you tell people about what you’re doing?” And that used to be such a fear and maybe you have a comment on this too. It was so scary to try to answer that question. I would make up stories, and I came up with great stories. I would tell people, “Oh, you could use this answer. And you could use that answer.” And what I found now is I just tell the truth. I don’t try to be aspirational about it and let people come to their own conclusion. Hopefully, they can see, if they know me, that I seem a lot more content. And if they don’t know me, they’ll ask interesting questions and the conversation goes in a much more authentic direction.

Mad Fientist: Yeah, that’s really good. I still just rely on the old just programmer. But I just do it for myself now, I just work for myself—which is true. I still do write code for myself. But yeah, I haven’t reached the point where I’m comfortable just telling the full story I guess.

And have you ever had any pushback when you have told people that?

Marla: You get a lot of the typical, “Well, I could never do that.” And because I’m single and I don’t have kids, I think that’s a built-in safety for people to say, “Oh well, I could never do that because my expenses are too high” and that kind of thing.

Of course, I give people that. Everybody’s got to figure out their own—
Not very many people—and I’m sure you’ve found this to be true—actually want you to help them do the same thing you’ve done. And I don’t try to brag about my life or tell people they should live like me. I just tell them what I’m up to. And most people don’t want to drive an old car or live in a one-bedroom apartment. So they kind of maybe feel sorry for me. Well, that’s just fine.

Mad Fientist: Yeah, exactly.

So, you had a high power career, and I’m sure you had a lot of stress. So, do you think it took the three years of straight up early retirement to finally reach that point where you finally got all that career stuff out of your system?

Marla: I don’t know, that’s an interesting question. it definitely took more than a year. And then, there was a lot of false starts or ideas of how I’m going to spend my time without probably self-criticism I guess of like, “What am I going to do? Why aren’t I doing this?” telling people I’m going to start a blog or write a book or something that sounds great, but then still not doing it.

So, rather than the stress of the work, it was working that stuff out. It was trying to figure out what makes me tick, what’s going to make me happy. I can go on amazing trips, and I certainly did that a lot for the first few years, but then sort of what life do I want to live on a day to day and week by week basis.

Mad Fientist: So, let’s talk about that because we chatted in person about travel and things like that. So have you planned to do a lot of travel? And then, was it similar to my situation where it’s like, “Okay, yeah, this is fun and all. But doing this for the rest of my life like I thought I was going to isn’t really for me.”

Marla: Yeah, I still love travel. And I look back on the last four years of how I spent my time, and the first couple of years, I traveled for 119 and 110 days in each of those year.

Mad Fientist: Wow!

Marla: So, obviously, it was a big part of how I thought I would want to spend my time. And then, it’s gone down to—like this last year was more of an experiment in being home more. And it was around two months of vacation days or travel time.

So, I didn’t really have a plan like I wanted to be a full-time global nomad, that kind of idea. But the idea of slow travel and taking big trips and being on the move was very appealing. And to a certain extent, it still is. But I think that feeling where you’re working and you have a vacation, that feeling you get when you’re on vacation is so exciting. And it’s because it’s an escape from a stressful life. But if your life is no longer stressful, you no longer need that escape.

Mad Fientist: Absolutely! Yes. So, how was the last year with less travel? Did you enjoy it more? Did you miss some of the travel? Or like me, did you really enjoy just normal life at home because, as you just said, it’s less need for escape when you actually can build a life that you really love where you live?

Marla: Yeah. I think it’s how I am on the inside that has changed. And no matter what I’m doing now, I think I’m going to just be more content. So the difference is like I didn’t miss going somewhere. I still have a long lists of places I want to go and things I want to do. I think it will vary from year to year how much I’m travelling or whether I move somewhere part time. I think the whole geographic arbitrage is very appealing.

I think I still look at life as an adventure, that I’m probably not going to live in one place as a home base all the time. But I think I’m just more comfortable.

That whole thing of “wherever you go, there you are,” that just resonates for me where I was searching for happiness in external physical locations or external experiences. And now I feel like I’m just happy to just be. There’s nothing aspirational about my life that other people can duplicate other than doing the work that it takes I think to try to figure yourself out.

Mad Fientist: So yeah, can we talk about that because I think you and I have had similar struggles after leaving work. And we’ve talked about it in person and things like that. You definitely seem like you’re in a great spot. So, can you maybe talk about that journey, some of the things that you did struggle with after leaving your job and how you worked through them?

Marla: Sure! I mean I think identity is a huge issue if your career has been important to you and you’ve always enjoyed external validation. I really did. And if you take that away, how do you get validated? And how do you recognize that, external validation, there’s nothing real about it, so you have to feel good about yourself just for being you?

Mad Fientist: Yeah, that’s the same conclusion that I’ve reached. And I forget where I was being interviewed for something, and we’re talking about success and how, if you’re okay with not having success anymore and things, I thought about like the past six months where I’ve actually had a normal life just here in Edinburgh and really trying to build this new life that I’ve always dreamed of having.

And you have a core focus over that time. It’s just like putting in the hours every day doing the thing that I want to get better at, and then just judging if I’m getting better against myself, which is nice to not even look externally because I sort of feel like I won the game. I won the game. I’m outside the game now. And now I’m just doing this thing on my own to just get better so that I have more fun doing it.

And that’s only a recent change. But yeah, not looking externally anymore is really freeing.

Marla: It is! And I’m not saying I’ve cracked the code, and I’ve figured it out. But at least I feel like I’m on the right path. and I think, what you’re describing, you are too.

I think IT would be great to delve into your latest written post, which I think was brilliantly written, about Maslow’s Hierarchy of Needs and the meaning of life. So the idea that if we get to a point in this pyramid of needs where we’re working on self-actualization, can that be something that’s interesting or instructive or helpful for other people who are kind of wondering, “Well, what am I going to do when I’m finished?” or “How can I start thinking about those things while I’m still working, while I’m on the path?”

I think that’s kind of the point. I think you have over to 200-ish comments from that post. And I would say like I didn’t find any that were negative. People were really kind of wowed by it. It made them think like—because you did your own pyramid about kind of the hierarchy of FI also. But more people were talking about that whole, you know, reaching the top of the pyramid. And I’m not saying that as like you and I are somehow self-actualizing, we’re at the top, and we’ve figured out all the rest, or that that’s better. A lot of people commented on how important the self actualizing piece is no matter what level you are in terms of needs and that many people have figured that part out even with very little in terms of money.

So, I look at it as good fortune to have the money so that I have the time, so that I can spend time thinking about this. I think if you’re working hard—and one of the posts that I think has been the most instructive for me, and I think is super helpful for anybody on the path to FI is Doug Nordman’s post called The Fog of Work. Have you read that one?

Mad Fientist: Yeah, I have. It’s great. I’ll link to it in the show notes.

Marla: And what he basically says, because he writes the Military Guide to Retirement, he’s basically using the metaphor of the fog of war, but the fog of work, and saying like, “How do any of us expect that we’re going to be able to figure anything out while we’re working? We’re tired! You barely have time to—you know, you come home and that’s when you want to have downtime or social time or go on a vacation.

And then, he even points out, when you’re on vacation, you’re having like the “work of play.” It’s work because you got to go see the sights and eat all the best food and drink all the best drinks and party. And of course that’s fun. But when is it that you’re supposed to have the time to do planning for your life or think about bigger things.

So, I guess that’s where, if you have this luxury—I’m not saying I sit around and ponder this out. But it’s great when we can make friends in the community who are either a little bit ahead of you in terms of being no longer working or they are pondering the same things you’re pondering.

Mad Fientist: The problem I see is that FI is like the perfect distraction from trying to do that or feeling like you have to. Like at least for me, I was like, “Oh, I’ll just be happy when I reach financial independence.” And I think a lot of people are probably in a similar situation. So it is like the perfect distraction.

So, I think I said in one of my posts, it’s like you said before, we feel like we’re above the consumer culture because we don’t have to go out and buy all these fancy, shiny things. But in reality, FI is just another shiny thing. And rather than treating us to make us feel better by going out and buying a fancy meal or going and buying a new bag or a pair of shoes or something, we instead are just focused solely on optimizing our investments or our asset allocation or something because FI is the thing that we’re using. We’re putting all our hopes and dreams on it. And it’s a perfect distraction to make us not have to think about these things.

So, do you agree with that? And do you see any ways to help people see that?

Marla: I just got goosebumps hearing that because I think we’re so much on the same page with that thinking. Everything can distract you, right? And to actually have to sit and be in your own thoughts, and be in the moment, and not be looking at your phone, and not be thinking about the next thing or the past thing—
And that’s where start to see a commonality with people trying to try out meditation and think about mindfulness and settling and quieting your mind and what the philosophers are trying to teach us. I mean that’s how I’m spending my time—reading things and really trying to just be, and be happy just being.

And that sounds simple. But it really isn’t. We all have insecurities. And we have active, chaotic minds. And we have self-doubt. And there are tools to work on those things, but you have to want to. And it can be painful.

Mad Fientist: So, during your journey, was there any sort of books that you read or any things that you did in particular that helped you get to where you are now?

Marla: Yes! In terms of resources that helped me or books I read, I found a few things. I happened on—I don’t love the Tim Ferris Podcast, but occasionally, I think he has guests that are really interesting. And then, I go seeking out more information from them. He had a guy on called Ricardo Semler. Did you listen to that one by any chance?

Mad Fientist: I haven’t, no. I’ll put it in the show notes, and I’ll take a listen then.

Marla: He is a businessman in Brazil. And he won all these awards because he took a family business. I think his father was dying or ill. He sort of made his son take over this very high value—it’s like one of Brazil’s top companies. And he was very young, in his 20’s. And when he took over the company, the first thing he did was fire 60% of his top managers. And then, he created this very different corporate culture which was very liberal and all kinds of interesting freedoms for the employees.

But in the interview that he has with Tim Ferris, he talks about a few things. One was I guess he had a health scare, or because his father had died young, he had a lot of fear about dying young. And so he created things called terminal days which he says obviously sounds very negative. And was referring to “terminal illness.” And so in his week, he made two days of the week, days that he had nothing on his schedule, and he could do whatever he wanted. His family all knew that they couldn’t schedule him. And he didn’t use them as like, “I’m going to go jump out of planes.” He really used them for just thinking and reflection and being able to say yes to things that came up and use those days accordingly.

So, he had some interesting philosophy that I liked. And also, I guess he’d won all these awards. He’d written books. He had thesis that he’d written. And he burned them all because he didn’t want his children to have to—he felt like there was so much ego around those things. He knew he’d done them. He no longer needed physical representations of those things. And he didn’t want his children to have their knowledge of him be based on these other people’s opinions or books. He wanted his kids to just know him for him.

And I was like, “Wow! This guy is really different.” His book is called Maverick, like the way he started a business. But he’s like a real philosopher at a different level. I found him fascinating.

And he talks about, as his business philosophy, the three Y’s. And you talked about that in one of your articles. And you were talking about Vicki Robin telling you like using the Y’s. And maybe you can talk about what Vicki taught you about it, and then I can tell you what he said about it.

Mad Fientist: Yeah, it was actually in that hierarchy of financial needs post. She said, “You just have to keep asking yourself why,” you know, figure out something that you really enjoy doing or got a lot of satisfaction from. And then just try to figure out why. Just keep saying, “Why? Why was that fun? Why did that give you satisfaction? And why was it worthwhile?” Just keep tryign to ask yourself why until you can’t ask yourself why anymore.

And that boils down to the core essence of what it was about that particular thing that made you so happy.

Marla: Yeah! And he talked about that. And he said you had to do it three times. And if you asked yourself, “Why this?”, then the answer to that question, “Why that?” And I think you did that very well in sort of coming up with your purpose or at least a synthesis of a direction or a statement of where you want to go.

And I guess it comes from Toyota. They actually had this five Why’s. It’s part of their management and production style. I looked it up on Wikipedia. It’s kind of interesting. But I think it worked even better as a personal something to think about. So, he was helpful.

And I read a book. This one was almost like a joke. It was called How to Be Miserable? And the author is Randy Paterson.

And so, I read it thinking, “Well, that’s kind of funny. I’m going to read this, How to Be Miserable?” Maybe I’ll even read you this little quote from it because it’s kind of crazy. I read the book and went, “Oh, I thought I was happy. But now, I don’t know.”

So, he asks this question. “There is one question you must never ask yourself.” And remember, this is a little bit tongue and cheek because it’s an instruction manual on how to be miserable. “If I were already good enough, what would I do then? If, that is, you didn’t have to make up for your inadequacy, what would you do with your life? If you did not have to [unclear 25:17], what would you read? What films would you see? What courses would you take? Where would you go? Having become fully capable, what would you use that capacity for? Where would you make your contribution?”

“If you ask questions like these, all your work on the misery project might come undone. You might begin living your life rather than preparing for it. And you might discover that that alone can sustain you, elevate your mood, and destroy the cynicism and unhappiness you have worked so hard to create.”

Mad Fientist: Wow! That’s really good.

Marla: Yeah. So anyway, that book is kind of fun. But it actually really was helpful. And you’re Non-Traditional Financial Independence, your podcast interview with Chris Hutchins, when he talked about doing one memorable thing per month, I thought that’s super cool too. That really stuck with me.

Mad Fientist: So, you’d mentioned something about Maslow’s Hierarchy of Needs. You want to talk a little bit about that because it definitely relates to what we were just talking about.

Marla: Oh, absolutely! That is a good segue way. I was looking at the pyramid and thinking it’s a nice answer if people are asking me what I’m doing to say, “Well, I’m self-actualizing.”

Mad Fientist: Yeah, it doesn’t sound pretentious at all.

Marla: No, it’s not at all pretentious. But then I looked at the pyramid and I went, “You know what? I don’t know if I figured out all of these. I’ve certainly got a roof over my head and enough food to eat. But these issues of belonging and esteem I think are really critical and important.”

And esteem, in particular, like when we were talking before about comparing ourselves to others or keeping up with the Joneses, being cautious about our ego and caring what other people think, I think that’s probably a lifelong struggle that is hard to get past. So I like to look back at the pyramid and say, “Maybe it’s more of a circle where we have to keep on working on some of these things.”

If we’re retiring early, and we’re leaving this high salaried career, we have to kind of face our own—you know, should we be doing that? Are we wasting an expensive education and an investment of time in our careers? And how can we justify that? And I think we want to justify it to ourselves, but we also want to justify it to others—this is where caring about what other people think really does come into it—and even to our parents.

I think many of us are leaving the workforce before our parents. And that’s really strange. And if we’re doing that, we want to make our lives—like, “Well, what are you doing instead? Why are you not going to be a lawyer anymore? How are you being useful or productive or living meaning?”

And so I think you touched on that in your article talking about “Do we need to leave a legacy, or are we searching for immortality?” I don’t know if you had some thoughts about that part of it. We can talk about that a little bit.

Mad Fientist: Sure, yeah. No, I’m still trying to figure it out. And like I said in the post, as I thought about all those things, I realized that that stuff isn’t actually worthwhile or important or necessary to strive for. And I couldn’t come up with anything better than just being happy and making as many other people happy as you can.

That’s really where I’m still at. I don’t know what are your thoughts on that. Are you similar…?

Marla: I think it’s true. I think that I want to sound good, both to myself and to others. And the “sounding good” is this giving back idea. And really, maybe the giving back certainly that you’re already doing by writing your blog and by sharing your story and by just being an example in the world, I think that’s enough.

And this idea of trying to just be and be content, I think maybe that’s the answer.

And then, what happens by being that way—like interestingly, I have in my room a Buddhist saying. I look at it every day. But I didn’t think about it until I was preparing to talk to you for this conversation. I was like, “Oh, this line kind of says it all.” And it just comes from Buddhist teachings. It says “to bring peace to the earth, strive to make your own life peaceful.”

What’s beautiful about that is it still has the word strive in there. So, there’s an effort required to be happy. And by us being happy, can we make the world happier? Probably. Can we be an example? Can we share our story and change the world little by little? We leave the workforce, that leaves a job for someone else. We show that you can live simply and without spending a lot of money and be content, surely, that’s a positive lesson for the world.

Mad Fientist: I’m so glad you said that. And I’m so glad you said the word strive as well. I have a few articles that I’m currently trying to piece together. And it’s sort of that exact idea. And it’s all about mastery I think rather than having these goals that you try to achieve and reach. It’s really just about getting better every day at being happy, at living life, at helping others, just all of those things, just trying to get better every day and striving for progress I guess.

Marla: Yeah, I think that’s what it comes down to. And I think that’s why having purpose, having meaning, you don’t want to give up on those ideas. It’s just that the direction doesn’t necessarily have to be something big or something that you can brag about or something that sounds good to others. It can boil down to something a lot more simple.

But then, once you’re thinking about the world in that way, I think opportunities to authentically give back or try to make the world a better place, I think those come out, that it’s all about motivation and maybe timing of how to work on those things.

This luxury of time that you buy yourself through the pursuits of financial independence gives you the opportunity to explore things that you never had time to explore before.

Mad Fientist: That’s fantastic. And this has been such an amazing conversation. I knew it was going to get pretty deep based on all the chats we’ve had in person. So I’m super excited that you agreed to come on. So thank you for that.

But I couldn’t let you get to the end of this without admitting to how cruel you can be sometimes. If you could just tell everyone the Benjamin Button story that has been haunting me ever since we met way back in 2014.

Marla: I’d like to point out that, as I’ve said in this interview, in 2014, I was not nearly as evolved in where I’m at. And obviously, I had a big chip on my shoulder. So I think the Benjamin Button story really shouldn’t be told because it’s not flattering to me.

Mad Fientist: Oh, it has to be. It’s got to be. Come on! You’ve evolved personally obviously. I’ve seen it over the years. But the Benjamin Button I think has still stuck around all these years.

Marla: I don’t think it’s fair because the Benjamin Button story, it just makes you look good and me look bad.

Mad Fientist: No, it makes me look terrible! Most of the audience has only seen me in pictures. And the Benjamin Button story is Marla saying that I look like 20 years older in real life than I do in pictures. You’ve made me take pictures while being with you multiple years in a row, and then showed people how much younger I look in the photos.

Marla: Okay, I’ll tell the Benjamin Button story.

So, for those of you who haven’t seen this classic piece of cinema, greatness featuring Brad Pitt, the story of Benjamin Button is a person who starts out old and gets younger versus the rest of us.

So, Benjamin Button starts as a very, very old man, and then turns into a baby at the end of the movie. And when I first was reading The Mad Fientist, I really loved the blog. And in Brandon’s about page—sorry, that was some Canadian pronunciation of “about.”

Mad Fientist: It’s happened more than once this time, and I just let it go.

Marla: We didn’t say I’m from Canada. But now, the secret is out. So sorry, I just said “out” too. Now I’m really in trouble.

Under about on the Mad Fientist’s blog, there’s a photo, a very attractive photo of Brandon. And he’s on a hammock in Thailand. And I was very envious when I saw his picture because I thought, “This guy is so young. How can he be so smart and have life figured out and know all these tax optimization strategies and have figured out all this stuff? He is just way too young to know all of this stuff.”

And so, it was with great relief that when I met him in person, I could say, “Oh, thank goodness. He’s not as young as I thought.”

So, I think that sounds very justifiable. But my mistake was I never should’ve shared that.

Mad Fientist: This was like the first time we met. We weren’t like buddy-buddy by then. This was like right out of the gate.

Marla: Yeah. No, we basically never met. And I had this in my mind as such an important thing that it just burst out of me. You know when you say things, and then you wish you could suck them back in? It was one of those moments.

Mad Fientist: So yeah, this has been great. I knew this was going to be awesome. And you definitely lived up to expectations, so I thank you. And as you’re probably aware, I always end all my interviews with asking: “What’s one piece of advice you’d give to somebody on the path to financial independence?”

Marla: I think it would be it’s not a rush. You don’t need to compare yourself to the latest 30-year old. There’s so much great life experience that you can have through your career. And you know what? Even if you’re hating your job, there’s lessons in that too because nothing’s ever perfect.

And I think I said earlier in our conversation that “wherever you go, there you are.” So, if you think you’re going to be happy because you retired or because you lost weight or because you gained mastery over something, that’s not what brings happiness. You’re going to have to do the work to be happy. And you can do that at whatever point you’re at.

So, there’s no rush. Enjoy the ride.

Mad Fientist: Perfect! Thank you so much, Marla. If anyone wants to get in touch with you, should they just leave comments on the show notes of this show? Or do you want to send them anywhere?

Marla: People can reach out to me on Facebook because I think it’s easy to find me. So, get my name in there, and they can send me a message that way if they would like to.

Mad Fientist: Okay. I will put a link to that in the show notes too so they don’t have to search for you.

Thank you so much. I can’t wait to see you again. Hopefully, you’re going to be making it over here for a trip, which we talked about before. But thank you so much for doing this.

Marla: Thank you very much for having me. It was a really good conversation. It was fun. I don’t think it was quite as silly as it should have been.

Mad Fientist: I know, we got way too serious.

Marla: …way too serious. And I think anybody that meets us in person needs to know that we are super fun and we do not talk about all this deep stuff all the time.

Mad Fientist: No. Well, you did share with me that you have a newfound joy of hard liquor which is a great after-work/early retirement goal of yours, which we didn’t talk about. But now that you do, then yes, when you come over, we’ll have some good whiskey, and we will have a proper conversation that we can record for episode two of this series.

Marla: I agree! More drinking, less philosophizing.

Mad Fientist: Alright! Thanks, Marla.

Marla: Thank you.

Mad Fientist: Bye!

Marla: Bye!

Mad Fientist: Hey, it’s the Mad Fientist here again. I hope you enjoyed my chat with Marla as much as I did. It’s always such a pleasure talking to her as I’m sure you’ve realized from listening to that.

Before I go today, I just wanted to remind you that if you want to get that PDF that I mentioned at the beginning of the show that contains all the great advice I’ve received over the years on the podcast, just head over to, and you can get a free copy of the PDF there.

Anyway, that’s it for today. So thanks for listening. I’ll see you next time.

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]]> 24
Money Talks – Live from the UK Chautauqua with Vicki Robin Wed, 28 Mar 2018 08:11:48 +0000 Listen as we play the first-ever game of "Money Talks", the new game created by the author of Your Money or Your Life, Vicki Robin!

The post Money Talks – Live from the UK Chautauqua with Vicki Robin appeared first on Mad Fientist.

Last August, I was down in England with Vicki Robin (author of Your Money or Your Life) for the FI Chautauqua.

We were chatting about the new version of the book she was working on (which is out now!) and she mentioned that she created a game called “Money Talks” to go along with the new edition.

The card game consists of 52 different cards, each containing a different money question or topic. The idea is, you can use the cards to initiate conversations about money with family, friends, etc. (as you are probably aware, money doesn’t often get discussed in real life so this game attempts to change that).

I thought it was a great idea so I asked Vicki if she’d be up for playing the game with a handful of Chautauqua attendees and I’d record it for an episode of the Financial Independence Podcast.

She agreed and that’s what I’m sharing with you today!

Big thanks to Vicki Robin for teaching us how to play, to Ettington Park for the fantastic venue, and to Eduardo, Laura, Kimi, Matt, Brandon, Jason, Lena, and Meghan for taking part!

Also, thanks to Shane and Ollie for the much-appreciated beer deliveries during the taping of this episode :)

Money Talks Beer #1Money Talks Beer #2

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Full Transcript

Mad Fientist: Hey! Welcome, everyone, to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence.

On today’s show, I’m really excited to introduce a lot of guests. Back when I was in Stratford Upon Avon last year for the UK Chautauqua, I had the pleasure of sitting around the table with Vicki Robin, author of Your Money or Your Life and a lot of really interesting people.

And the way this came about is Vicki is releasing a new version of Your Money or Your Life. And to coincide with that release, she’s also created a game called Money Talks. And what it is is it’s a series of 52 cards, just like a deck of cards, but on each card, there’s money topics. And the idea is that this will help promote talking about money with your friends and family and maybe broaching subjects that you wouldn’t otherwise talk about.

So, when she told me about this idea early in the week, I thought that would be an amazing thing to try to do at the Chautauqua. And it would be even better if I could record it and release it as a podcast.

So, that’s exactly what we did. On the last day in Stratford, we all sat around the table, brought out the Money Talks cards, had a few beers, and had an amazing conversation about many different topics.

And that’s what I’m sharing with you today! So without further delay, here’s Money Talks live from Chautauqua UK with Vicki Robin, author of Your Money or Your Life and Chautauqua attendees Eduardo, Laura, Brandon v02, Matt, Lena, Kimi, Jason, Meghan, Ollie, and Shane.

Those last two guys didn’t actually participate in the talk, but they did bring me beer for the talk. So they both definitely deserve a shoutout. So thank you for that.

And a big thank you to everyone who participated. It was a lot of fun. And it was great to listen back to when I was editing it. So I hope you enjoy it.

Mad Fientist: We are in Ettington Park for the UK Chautauqua. And we’ve been here all week. It’s been an incredible week. We’re going to do something special for you today. I am going to pass over to our super special guest, Vicki Robin, author of Your Money or Your Life. And she’s going to tell us what we’re doing today.

Vicki: Hi, everybody. Yeah, one of the innovations I’ve done for the makeover of Your Money or Your Life that comes out March 2018 is to develop a set of questions that people can ask themselves in their journal or ask their mates or a group of people or open up in a workplace or have a conversation in a meet-up, a way for people to talk to other people about our thoughts and feelings and strategies around money.

It’s not about advice. It’s just simply learning together because what we all need to know is not necessarily embedded in the experts—of course, it’s you, Brandon—but it’s embedded in other people. It’s just we have to know how to unlock it.

So, these are questions to unlock the conversations we really want to have about money in our daily lives.

And the rules of the game really are that we’re going to go around the circle once, and very brief opening comment, a minute, maximum 90 seconds. Just we’ll have a topic, Brandon will introduce it. And you all will just say, “Here are some of my thoughts on it.”

And then, we’ll go around one more time with no cross-talk, no feedback. And you can keep in your own comment. You can say, “What I really meant to say…” or “Another thought I had…” or you could’ve heard something that somebody across the table said, and you could, “Oh, that makes me think about…”

So basically, what we’re doing is like finger painting. We’re squeezing a lot of colors out here on a collective art piece. And then, we’re going to open it up and just talk and see where the conversation goes.

And everybody has a question card faced down in front of them which is they’re intervention. If the conversation is driveling into meaninglessness or somebody’s over-talking, at any moment—no shame, no blame, no judgment—you can just flip over your question card and change the subject.

And we’ve never done this before, so we’re going to find out how it works.

Mad Fientist: Yeah, I’m very excited. So thank you guys all for being here. So yeah, this is something different from anything we’ve done before on the podcast. I’m really excited about it. So crack open a cold beer, which I will do right now. Thanks to Shane who brought beer all the way to England from Texas. So I have a Hopadillo IPA from Karbach Brewery.

And I just spilled beer all over my laptop, but that’s alright. We will find a napkin.

So, before we start, I just want to go around the circle so everyone can introduce themselves. And then we’ll just kick right in. So here we go!

Eduardo: Thanks, Brandon! Hopefully, your laptop isn’t too broken. Yeah!

So, my name is Eduardo. I’m originally from Brazil. I live in the UK. I’ve been following this stuff for a few years. I’m very glad that I came to Chautauqua. If any of you are thinking about going to the next one, yeah, it’s an amazing week, amazing group of people, amazing conversations—definitely not just the speakers even though they’re amazing. The conversations you have with the other guests are what makes the week special. So yeah, I’m looking forward to this game.

Laura: Hi, my name is Laura. I’m from London, UK. So I didn’t have to travel as far as everybody else. I’m just now down the right. So yeah, I’ve been following the Mad Fientist for a long time. So I’m really excited to take part in this.

Kimi: Hi, I’m Kimi. I’m from Brazil, but I live in California. I’ve come here to the UK. It’s been an amazing week. Highly recommended! And let’s see what this game is all about.

Matt: My name is Matt. I’m from Leeds, England. Like Laura, I’ve not had to travel too far either. I’ve been a convert from the Mad Fientist Podcast for probably about five years now which has got me really interested in this space. And the amount of laughter we’ve had this week and meeting like-minded people has been the real game-changer for me.

Brandon: Yeah, my name is Brandon. I’m from Minneapolis in the US. And this week has been incredibly inspiring, not just because of the speakers, but all of the people that I’ve gotten to spend time with.

I discovered FI about 2 ½ years ago. And man, I was inspired then… I thought. But now, I’m even more inspired. So I’m really looking forward to this game. And I’m glad to have been here.

Jason: Hi, this is Jason from San Diego. And I’m just going to say ditto. Everybody else pretty much stole my lines. This has been incredible. And I’m just going to keep passing it on here.

Lena: Hello, my name is Lena. And I’m pretty much at the beginning of my FI journey. And so I’m really looking forward to having this talk together with you.

Mad Fientist: Great! And you obviously know Vicki. Yeah, this is great.

So, I’m going to start off with an easy one. Obviously, we’re going to get deeper I’m sure. But this will be at least something that will get us going.

Talk about your biggest money mistake, and what would you do differently?

Eduardo: There have been several. Hopefully, none of them [derailed] me too far. So I’m still on the path thankfully.

I’d say one of them was leasing a car when I didn’t have to. You think it’s a good idea, it’ll make you look good. But just the money leaving your bank account every month, I just did not like that. So, that was a lesson learned. I wouldn’t do that again.

Buying lots and lots of pointless things. Small values, they add over time. They compound. Just getting rid of all of that waste, all of that inefficient spending is probably one of the biggest lessons I’ve learned.

So, lots of little things add up to one big mistake, I’d say that’s probably the biggest thing.

Laura: So, yeah, like Eduardo, probably too many to count, I’d imagine. But I think it all adds up. I think it’s the things where you spend and actually you don’t like what you’ve bought or you think you wanted it and you get it home and you don’t. So I think they’re the biggest mistakes.

They’re not necessarily the things I spent the most money on. They might’ve been of a lot of value, and actually, I’m glad I spent the money. But it’s the things I didn’t really think through.

Kimi: For me, it was definitely taking too long and being too unsure about getting into the stock market. I felt I came from a different country to the US, and it felt a little unsettling for me. So eventually, I summed up courage, and I bought a single stock. And I watched it go up and down. And I’m like, “I’m going to get comfortable with this because I need to get comfortable with this.”

So, I bought a single stock, watched it for about, I would say, four months until I was okay and I was fine to finally put money on the market.

But I had done it before, this conversation would be moved. I would just be here in financial independence way before I am today.

Matt: I think the bigger one for me has been a car. I was a former professional soccer player, so it was always the competition to have the best car in the car park. And it just became a way of life. That was normal.

So, like Eduardo, having a car payment just became normalized. And once you can free yourself from that, it’s so liberating. And then, obviously, it frees you up the money to invest and dive right in.

I was fortunate that I discovered saving and investing in 2008. So I bought a lot of my things on sale. So I’m one of the lucky ones.

Brandon: I would say, for me, it was really just understanding the value of money in my life. I think my big mistake was thinking that I get my paycheck, I pay the bills, and everything that’s left over is what I have to spend. And that was my understanding of money. I didn’t know that it was really a tool that I could use. I wish I could’ve realized that earlier.

Jason: I think my biggest mistake was, I’m going to say “believing the advice I was given.” When I first started saving and investing through 401k’s and stuff through my employer, the average advice was “Oh, if you could save 5%, you’re doing great. And if you can save 10%, that’s amazing!” And in the FIER community, that’s kind of like, “Oh, that’s cute” and they pat you on your head.

So, for me, the biggest mistake was probably everybody says at some point, “Man! I wish I had been able to start bigger sooner.”

Lena: :I have actually two mistakes I did. First, just like Brandon, I got the money at the beginning of every month, and I would just spend everything. I never really ran out of money [unclear 09:46]. It was just I would spend every single cent. And now I just think that was kind of dumb.

And the second thing I did, I did get some money invested in stocks, but I bought mutual funds. And I just realized about a year ago that this was not very smart, so I pulled out the money.

Vicki: Yeah, what occurred to me as we were going around the table—and it’s sort of an odd mistake (or maybe not)—but I actually put a lot of emotion into things I buy. I can’t get rid of stuff in my closet because I can remember every purchase, where I was and who was there. So there’s probably a lot of shopping mistakes in my closet that I just don’t get rid of.

But I was a co-owner of a house where we had a lot of people living together in this house in Seattle. And people started to move away, and other people moved in. There was a point that it was at the top of the housing market in Seattle. But I had an affectionate relationship with a couple that was living there, and I didn’t want to disturb them, so I wouldn’t sell the house.

And so, when they finally wanted to move, that was the bottom of the housing market in Seattle. I mean, it’s pitiful because it did go on Zillow recently, and now it’s worth twice what it was.

But nonetheless, I’m having a happy life.

Mad Fientist: So, mine was my wife—well, then girlfriend at the time—we bought a house in Scotland, and we did it up over 2 ½ years and sold it in 2007 for like over 50% than what we bought it for, just before the whole world collapsed. So we sold it, and then I was so excited because I’ve always wanted a portfolio to manage, I always wanted money, I wanted to invest and all these stuff… but I didn’t know what I was doing.

So, we looked on the Internet for like a financial advisor. We just picked like the top one on Google or something. I called him up, he came over, and he pretty much picked the funds that would pay him the most, but had previously returned the best return (which obviously, the past doesn’t predict the future). So we went into that.

He treated us like big time people. We were in our early twenties I think. And he’s like, “Oh, yeah! We’ll go in the golf course.” And I was like, “Wow! I’m a big shot now. I’m golfing with my financial advisor.”

And then, it was only a few years later, after obviously 2008 happened, so then everything cut in half pretty much instantly after we put it in there, and I couldn’t get it out because they had ridiculously high fees to withdraw it within the first five years. And that’s when I learned to never trust anyone else with your money.

Matt: Yeah! So, mine will probably be resisting index funds for too long. I think my ego is telling me I could actually pick stocks. Once you have a few winners, you really do believe your own story, I guess, your own hype. But then you read the studies and all the math and everything; not to mention the amount of time that you save.

So yeah, index funds all the way.

Thanks, Jim!

Mad Fientist: Jim Collins is smiling, is smiling in the corner. He’s giving the thumbs up.

So, this one is going to get real deep real quick. So at the Chautauqua, each of the speakers give a presentation. And it’s always shocking when they give a presentation because you expect them to talk about something else like Kristy and Bryce from Millennial Revolution—they’re here—and you would expect to travel, geographic arbitrage and those types of things, not buying a house and all that. But then they talk about something deeper.

And that’s actually what I did too. I’m sure everyone here imagined I would talk about tax avoidance or something like that. And actually, I didn’t.

It’s funny that pretty much every talk touched on similar things. And it all boils down to this question: “What is your calling, the work of your heart and soul?”

Vicki: Well, I get this one first I guess because I’m supposed to have thought about it more. This is Vicki again. You know, at some level, it’s just making people happy so that I’m living in a happy world. That’s a really simple way to say it.

But I’m like 72 now. I’ve been around in this body for a long time. And I finally realized that I don’t have to do everything. My issue doesn’t have to be the most important issue.

What I really love doing is using my skills and talents and networks to make a specific difference in the lives of people I love—and I love a lot of people, so sometimes I chose big projects.

Lena: :To be honest, I don’t really know at this point because I’m just trapped in the rat race right now. I do what I have to do. Afterwards, I do what I want of course. But it’s nothing really soul-searching or something where I say, “Oh, that would make me happy beyond everything I’ve ever done.”

So, I think one of the things that we can really buy with money with the FI journey is that we can really have the time to focus on what we’re good at, what we want to do in life, what we want to achieve, and how we want to be happy in the end. So I’m going for it.

Jason: My grandfather basically advocates the campsite rule for the whole world. And that always resonated with me. And so my goal is to leave the world a little better than I found it. And I really think that helping spread the word about FI especially—the RE is kind of optional, but at least the FI part of things…

So, I would like to help spread the word. And even more importantly, help people figure out what they need to do to get there—whether it’s one-on-one, small groups, conferences or whatever. That’s the kind of thing that definitely moves my soul. It makes me get some fire in the blood.

Brandon: This is a super hard question. And I think a lot of us have spent a lot of time trying to answer those questions. I don’t know for me that there is an answer, so I reject your question. And I will insert my own context of how I think this should go.

And I think that there’s purpose to be found in many things for many people. And that’s something that I’ve kind of maybe learned hints of coming up to the Chautauqua. But definitely, it’s been solidified through some talks. And I don’t remember whose talk it was, but it was almost specifically mentioned. I think it was like—you know, I’m a business analyst, but when I was seven, people weren’t like, “What do you want to be when you grew up?” and I was like, “I want to be a business analyst!”

However, I’m not unhappy with my career. I love being a business analyst. And I love the work that I do. I find purpose in what I do. And I think that business analysis is not the only thing I can find purpose in. I think there’s a lot of things I can find purpose in.

And so, that is the answer to my own question.

Matt: I think we all acknowledge that FI is a route to fulfill your dreams, your passions, what you’ve always wanted to do. And I think the difficult thing for me is that the two things I always wanted to do when I was younger was play professional soccer and be a journalist. And I’ve played professional soccer, and now I do journalism. And I’m 37. So, it’s “what else is there?”

I don’t know if it’s necessarily one thing or one passion or one dream. The Millennial Revolution guys were talking this morning that you’ve almost got six or seven lives if you live for another 50 or 60 years. And I think that’s the most exciting thing. Part of the excitement is maybe not knowing.

Kimi: I think your calling, it changes over life. It changes as you mature. And for me, it has definitely changed. For me, I would say that, when I was younger, my calling was a lot closer to my survival skills. So it was being very good at my job. It was being able to provide for myself. It was being able to make money and be free.

So, I’ve always looked for freedom, but through this fulfillment, I think that has changed as I matured. And today, I seek a lot more community. So I look for impact and I look for community in some sense, whether it’s smaller or bigger.

So, definitely removing the survival, not needing money anymore and removing the survival from the list, has allowed me to go for a deeper purpose of having community.

Laura: I don’t know if my calling now will be my calling later. But I’m not FI yet. I’m about to drop down to part-time work. So I get to have a bit more time to explore some things.

And what I’d really like to do is I’d like to help kids read. So I’d like to go to school. I think that if I couldn’t read, I wouldn’t have found blogs, I wouldn’t have found FI, I wouldn’t have found you lovely people. I think it opens up such a world of possibilities to people if they can actually read.

So, I would really like to spend some time, and then see where that goes.

Eduardo: So, I’ve had the most time to think about this, but I probably still don’t really know the answer. But I have been thinking about this topic more recently in my life. I haven’t narrowed it down, but I do know that there’s something to do with being outside, being active, bringing financial education to younger people. It’s something that I’m quite passionate. The fact that we don’t learn that in school, I think it’s criminal almost.

Being healthy… somehow mixing all of those things together I think will bring me a lot of fulfillment in life. And I’m looking forward to narrowing that down a little further and finding out exactly what it is. But I’m sure it’s something along those lines.

Mad Fientist: I have a bit of unfair advantage because my whole talk was sort of talking about how you need something to retire to, and that to that you retire to needs to be big enough to keep you happy and take the place of your job.

So, I thought long and hard about it, and I reflected on some of the most rewarding things I’ve done in my life and the most rewarding things I’ve created. And for me, it sort of boiled down to working hard at something to get better at it in order to create something that helps as many people as possible—myself included.

So, a happy life, creation and mastery, that’s what mine all boil down to.

Thank you, Ollie, for the delivery of Guinness. Thank you. You got yourself on the podcast!

So now, we’re going to open it up and we’re going to chat about maybe something someone else said that you wanted to add to or comment on or if you wanted to dive a little bit deeper into a certain topic.

So, I’m going to open it up. Anyone want to jump in? Yeah, Kimi…

Kimi: I think that something Eduardo said about teaching financial knowledge… I think that a lot of us, there’s so much myth, and there’s so much taboo around money, we don’t talk about it enough. We don’t talk about it openly enough. So we always feel inadequate whenever we’re talking and we are approaching money.

And this is something that I would like to debunk. It’s something that I think we should all—and thank you so much to you, Brandon, and to everybody who talks openly about it and shares information. I think it’s the essential thing so that we look at it, and we’re like, “Okay, it’s not unattainable. It’s not a myth. We can all get there.”

Matt: I think this week has opened everybody’s eyes on the Chautauqua that when we’re at home and we’re following this path, we feel like the odd ones out. And finally, we found our people.

I think that’s been the three words from this week, “we found our people,” that we’re not alone, we’re not worrying about the odd thing. We’re all worrying about the same things. And actually, it’s not the minutia that we’re worrying about. It really makes no difference in the grand scheme of things with the savings rate. Simple investing will allow us to achieve whatever we want to achieve.

And I think in your talk, that was almost the massive, fundamental question. And it probably takes a bit more than a podcast to answer.

Mad Fientist: So, how do you talk with people in your real life because I know I spoke to Ollie who’s the man who just delivered the Guinness—thank you again—and he said something really interesting. He’s like, “I share it with everyone I know because if any of my friends knew about this, and I found myself learning about it 10 years after they actually hit FI, and here I am just like working paycheck to paycheck possibly like I was, I would be really angry with them and sad that they didn’t just share that journey with me early.”

And that’s something that hit home with me. I don’t like talking about it in real life with people I know because I feel like 1) they feel like I’m judging them, 2) I feel like I’m bragging about my financial standing. It’s just very difficult.

So, does anyone here on the table talk to their friends and family? And if so, how do you do it in a way that you don’t have any of those negative consequences?

Laura: I think I’ve been probably talking about it in the wrong way up until now. I’ve been trying to sort of always simplify it down for people to say, “I want to retire early.” And actually, I think a lot of people are very stunned by that. But then it comes back to this whole “What are you going to do afterwards?” or “I really like my job, so why would I want to retire?”

And actually, I think I need to actually change the way that I’m talking about it. I’ve been trying to simplify it down, but in that way, I think I’ve actually been isolating people away from it and probably not explaining it very well.

So, I think I’m going to talk a lot more about how it’s much more about getting freedom and then finding purpose. And some people may think that’s a bit deep and not really be interested in it. But maybe it would just invite a few more interesting conversations rather than just “Well, I like my job, so I’m not going to do it.”

Jason: And to just extend on that just a little bit, I haven’t really been talking about it with people other than my closest friends and family. But I’m thinking about talking about it more and more—hopefully, we’ll see.

But what I’m thinking is a really good hook to get people interested is to sort of point out that no job is guaranteed. One of the talks kind of went into, “Well, you could get a new boss… the company could get purchased by another company.” That has happened to me multiple times at this point, and a really good job turned into way less of a good job. Or you get let go as even Jim has had happen to him once. You never know what’s going to happen.

So, having the protection of a runway of a few years. Basically, the FU money concept, even if you don’t need to say FU, having it there is such a comfort. It lets you take some more risks at work which will actually probably work out in your benefit.

So I’m thinking if I can word it that way, people who initially will be like, “Well, I like my job. I don’t really need to worry about this,” then if you can sell them on some other options, that’s a great way. It’s like I said, it’s sort of the hook to get them interested.

And the numbers, they’re important of course. I’m not trying to say they’re not. But that’s sort of more mechanics and plug-and-chug and figure out your risk and a few other details that can come later when they’re like, “Oh, great! Teach me more. What plugs should I read?” or whatever.

Vicki: Yeah! So, I’ve obviously spent many years talking about this to people with almost a missionary zeal because, really, I wanted to liberate people from feeling like they have no choice. And I also was really passionate—I am passionate—about unhooking people from a consumer society, a throwaway society. And I’ll tell you, if you just talk about your passion for—

Like if you talk about children, if you talk about financial literacy for children, I’m passionate about that. I think our kids are being brought up in a too commercial culture. And so I’m doing this experiment for myself because I really want to unhook and I want to help other people unhook.

That actually goes down like honey because everybody knows we’re hooked.

And the other thing I found is personal story. It’s a basic “I once was lost, but now I’m found” story. It doesn’t have to sound that religious. “A certain point in my life, something happened. And I realized that changed so much for me. And here are some of the ways I’m happier from that process.”

I will also say—I just want to throw in—that as Jason said, we have this term FIRE, financial independence/retire early. Retire early is maybe a little—but then if we talk about financial independence, “I want to be freer. I want to be freer of debt. I want to be free,” everybody wants to be freer. And this is how I’m going about it. Actually, I want to be totally free, blah-blah-blah.

It’s a very human thing. People really want to hear your story. They don’t want to be marketed to. And they don’t want to be convinced. But you tell a story, and it lets them rehearse it in themselves.

Matt: I think it’s a British culture maybe not to share anything. So yeah, I think it’s a taboo subject, probably the most taboo subject, talking about money. So it’s quite a delicate thing to talk to people about.

And if you’ve got a group of friends, or you make the most money out of that group, then you can sound preachy and people can say, “Oh, you can do it because you earn this much and I don’t earn this much.” It’s decoupling the amount of money which will allow you to reach that freedom to find something else.

Even if you’re a teacher, you can still do it. You could just end up going teaching in other countries. But like Laura said, helping people of less advantage to get on in life, I think that’s a really noble thing.

Kimi: And one thing I think is important and is interesting because we talked about it before is also sharing your mistakes. So by exposing yourself, and by saying, “Hey, this is what happens…” or “This is what happened to me when I was down. I failed here, and I was down. This happened, and now I’m better. I’m finally found” is also something that I think connects you to people.

Even though you are exposing yourself, and you need a slightly thicker skin to be able to expose yourself, you are providing this information not from a standpoint that “Hey, I’m financially independent. It’s so great. It’s here where the clouds are beautiful.” It’s not about that. It’s about being on the ground, being in the trenches.

Everybody is in the trenches. We need to go down with them and say, “Hey, I was there. I was below that. And this is what happened to me.” I think then you open a connection and you’re able to talk to.

So, being able to be open and expose yourself is a big thing to get the empathy.

Jason: Yeah, going back to Matt’s point, one of the big eye-openers I had was learning the whole savings rate table because that’s percentages, right? It doesn’t really matter how much you make. It’s a percentage of your take-home pay. So if people can get their heads around that, it’s really powerful as well.

Mad Fientist: Yeah, I love percentages. That’s the best way to go.

Brandon, you had something to add there?

Brandon: I think when Vicki was originally talking, it made me think of, during the Chautauqua, we’ve brought up a bunch of times office space, and we talk about the concept of FU money and being able to just say, “I don’t want to do that anymore. I’m going to walk away.” It’s not just that, but it’s like that confidence that the FU money gives you. It can almost change you as a person into a better person.

And so, the office space references, when Peter gets hypnotized, and then he just has this realization, he’s like, “Yeah, actually, I don’t really care about my job or how well I do or the promotion. I don’t care about the money… like nothing,” and he walks into the meeting with the [bosses], he goes in, he pours himself a glass of water, puts his feet up, he’s like, “What’s going on guys?” They start asking him questions, “Well, what about this? You’ve been missing a lot of work,” and he’s like, “Well, I wouldn’t say I’ve been missing it, Bob” It’s that confidence.

Chris Hardwick has a great quote about confidence. He says, “Confidence is about having options.” And having the FU money is like having all of the options. And that’s where the freedom is. FI brings you that freedom to choose whatever option you want.

Mad Fientist: So yeah, this is all great stuff. I think we’re going to move into the round where we just pick out the wildcard in front of us that was just randomly shuffled through this deck.

Jason: I jumped it. Mine is: Talk about an early memory of money and how it affects you now. I actually have one that comes right up on this. God, mom, I apologize!

So, I was probably about 13, and my dad lost his job. My parents were not massively over-extended, but they had a house and a boat and just the normal things that you accumulate as typical adults these days in a middle class set-up. And he couldn’t get a new job for a couple of years. It was just rough times.

I watched them suffer, be stressed about it, be unhappy about it. They were very good at keeping the fighting away from me and my sister. I don’t know how the heck they pulled that off. But it really made an impression on me because, teenagers, this is kind of like the time that happens. And I still kind of remember vaguely the “Oh, this is what not to do.”

So, luckily for me, that taught me very early on never, ever, ever spend beyond your means. And don’t go into debt for pretty much anything.

Obviously, later I learned houses, cars—oops, the cars.

Here’s one more mistake. But that’s for me, one of my earliest financial memories.

Kimi: Also, mom, sorry. But I think one of my earliest financial memories are that I’ve always been somewhat of a rebel and I wanted to do things my way. And my mother, very strong woman—very, very strong woman—she would look at me and say, “Well, that’s all fine and dandy, but you live in this house, I pay for everything. When you have your money, you can do things your way. You’re not 18. You’re going to be here. And you’re going to abide by my rules because all of this is provided by me.” And I’m like, “Okay, great!”

So, at 13, I found my first job. And I’ve been working ever since because I looked at it and I said, “Okay, if that’s about money, I’ll get my money, and I’ll start being my own boss as soon as I can.”

So, it’s pretty powerful, but then it puts you in some situations, right?

Matt: Yeah, I remember when I was a kid—I mean my mom is the strongest woman I know—apart from my wife obviously. I’ve got to get that one in there.

I remember when she came home one day when I was a kid and she’d lost her job and she was in tears, and there was just me and her, she found a way to get another job.

And she has been so disciplined. She’s always found a way to save even though she never earned a lot of money. And I think that sticks with you. Even if it’s not obvious, it’s in your subconscious. And it’s probably one of the reasons why I’m here.

Brandon: So, during the week, Vicki told me a really interesting story about her earliest relationship with money. And I thought it was pretty fascinating. So I was sharing if she would share that with us.

Vicki: You’re outing me.

Yeah, this was on an early memory about money. I lived in an upper middle class family. And so I just never saw any transactions actually. I just never saw transactions happening. It was all a mystery. And so I didn’t actually know that things cost money.

I was very young. I was totally into my dolls. I had a Jeannie doll which was like a precursor, but more realistic, of a Barbie doll. And I loved dressing my Jeannie doll. I had a whole suitcase full of clothes for my Jeannie doll. And I make clothes for my Jeannie doll.

And then, my brother told me that if we cut through the back hedge, that we could go down […] and we could go over to a part of town I’ve never been in (because I never went anywhere). It was sort of like a rough part of town, but it had a toy store.

So, I’d sneak down. I’d go down. And I’d go in the toy store. And they had all these Jeannie doll clothes. So I’m like really excited because there’s a little coat, and there’s a little party dress. So I stacked up about seven boxes of Jeannie doll clothes.

And I just walked out! I didn’t know about the money part of it. And somebody stopped me on my way out. I was so ashamed and embarrassed and perplexed.

That’s all I remember of it.

Mad Fientist: Yeah, that’s the secret to FI. You just steal everything and then you don’t have to worry about money. That’s great. That’s the best.

So, we actually have a new surprise guest. So Eduardo had to go and call in from work from UK Chautauqua. So now we have Meghan. So please introduce yourself.

Meghan: I’m Meghan. I’m from the Boston area. Me and my husband are here at the Chautauqua. Ollie, the bringer of beer. We’re from the Boston area, and we’re both teachers—poor, poor teachers. How could we ever achieve FI?

We’ve been subscribers to the cult for about five years now. And we’re kind of halfway along our journey to FI.

Mad Fientist: Awesome! Welcome. We’re nearing the end. I just dished out a new wildcard for everyone. So I think we’re just going to go all the way around the circle. You just flip over the card. And whatever the question is, you answer it, and then you pass it on to the next person.

So I’m going to start with Vicki.

Vicki: Okay, here we go. What skills or social networks could you build now to depend less on money to meet your needs? What skills or social networks could you build now?

I’m actually doing that in my home town. We have a network, a volunteer network, that helps people stay in their homes [unclear 35:14]. We have volunteer networks that help the food bank. If I shop at the thrift store, then I’m putting money in the food bank. And later, I get to take money out of the food bank, take food out of the food bank.

So, actually, yeah, that’s the thing. The social network I’m building is my community […] and making that richer.

Lena: :Okay! Take us shopping with you. Describe where you are, how you feel and what you buy.

Actually, I don’t really like shopping; I never have. Somehow, I don’t know how it ended up in my apartment. No, but usually, I go grocery shopping. I do make a list on Saturdays.

So, I have this book where I write in what I want to cook over the week. And if I don’t have time, I just copy another week. But then I do make my shopping list in my cellphone and just go grocery shopping.

Yeah, somehow, sometimes it ends up being a little bit more like potato chips or something. Somehow, mysteriously, they appear on my grocery cart.

But the other part that I usually would go to to buy stuff is outdoor gear. But then, usually, I do have a purpose for going there. And I don’t come out with any other stuff.

Also, I manage to go into an Ikea and come out with nothing.

Jason: What do you want for your children/loved ones that money can buy?

Really, for my daughter—I have a 10 year old daughter—the main thing I want for her to have is a safe, happy, healthy home. That’s the main one. And that’s right now my largest expense by a large, large amount, is to give her a good home and a good place to go to school and all that kind of stuff.

Brandon: Alright! I have two cards. The group doesn’t know. But I’m going to flip them over and pick the best one because FI is about making your own rules.

And so the first one is: “What values and beliefs do you bring to investing?” And the second one is: “If you could take a year off work, how would you spend it?”

I’m going to go with the first one: “What values and beliefs do you bring to your investing?” For me, I found a lot of happiness in just living simply. I’m not a minimalist I would say by the sense of some other people that I’ve seen online practicing minimalism. But there are some aspects of it that’s simple for my life.

And so, I personally have never really had an interest in investing, pun intended. I was never interested in trading stocks and learning about companies and the stock market. And Jim’s book completely changed that for me because it’s the simple path to wealth. It’s like he wrote it right for me.

And so I read his stock series twice. And I read his book twice. And I feel like I have 100%, literally 100%, of the knowledge that I need to achieve FI and continue on this journey.

Matt: Ooh, this is an odd one. What is your life’s work?

Well, if you would’ve asked me 20 years ago, it would’ve been playing football forever which is not possible. That’s a really deep question to answer. Brandon, you give us about three weeks to work this one out. Ninety seconds, I’m not sure.

I think the thing that’s come out of this week when you speak to everyone is everyone wants to use the opportunity that FI gives them to fundamentally help other people, whether that’s really the children in schools. Mine, I came up with it this week without the pressure of work, giving me the space to think, possibly helping educate professional footballers not to spend as much as they already do and also help disadvantaged children, hard-to-reach people.

You can dedicate that time when you have the time to help other people, I think that’s probably the best gift.

Kimi: Okay! So mine is: Who or what would you trust to help you invest your money?

Well, I’m here, so Brandon, the Mad Fientist… and no one else ever. And he knows this. We’ve had a conversation. I actually stumbled upon the whole FI thing through Brandon and through his podcast. And then I heard the podcast, and then [unclear 39:32], and then I read the blog. And then I’m like, “Oh, Brandon, it’s going to be great!”

So, definitely, this is a very good group to help that I do trust to help me invest my money. There’s a paradox here because you come here and nobody tries to sell you anything. So probably that’s why you can trust them to help you invest your money.

But yeah, it’s a good group.

Laura: Okay! So how do you economize and what? How do you feel about it?

I’ve had a budget spreadsheet for about 10 years now. So back before I heard about FI, I was—I don’t know, just probably been nerdy and just wanted to track my money.

So, I guess I don’t economize on everything because I don’t want to strip it back to the bare bones because I think I’ll probably make myself miserable—and I have made myself miserable. I think it’s things like groceries.

Like Lena, I do a meal plan every week. And then I have been known to have several tabs of all the different grocery stores and compare all the prices, and then do some percentage variances from time to time because, yeah, that’s how it goes. And I just try and work out what makes me happy.

Holidays, probably don’t economize on. I try and use air miles, but they’re not as good as the US credit card air miles. So we do what we can. But I like holidays, and they make me happy. So I’m not going to economize specifically on that. But other things, I do try and make sure that I optimize as much as possible.

Meghan: What did you want to be when you grew up? What about now?

I remember, and I remember being told frequently, that when I was in first grade, and I went to school and somebody said, “What do you want to be when you grow up?” I said, “I want to be a teacher so I can be in school forever.” I just was such a little nerd and I just enjoyed so much about school and learning and just having all that at your disposal.

And then, for a while, I kind of wandered away from that. But obviously, that’s where I wound up now as a teacher. So now, I am a teacher, but as I’ve shared with a couple of people throughout the week, I’ve attempted to leave the profession several times over the last 12 years or so. And if you are a teacher, and you have a teacher close to you in your life, you’ve probably seen aspects of that.

And there was a blog post that I came across more than a few years back. She writes under the name Penelope Trunk. But the title, the blog was: Don’t Do What You Love. Keep what you love as something on the side, and then find something that makes you a lot of money. And for a short time, that really spoke to me because I was like, “Is this killing this thing that I love? It’s so hard. And finding the right circumstance is so difficult.” But I feel lucky now to be in a circumstance where I feel like I’m enjoying what I do.

And when we think about moving forward into FI, what that would look like is just doing it more in my own terms, being able to move aside the things about it that I don’t like and keep the parts that I do and having that freedom.

Mad Fientist: And the final card for me. Talk about one thing you own that you love? And what do you love about it?

So, I’m going to do two because they’re at the opposite of the cost spectrum. The first one is my Macbook Pro. Like I said at the beginning, I love creating things, and I can pretty much just create anything, including this podcast, on this machine. I love it so much!

But that’s a very expensive one. And the only other purchase I’ve made recently is one of those little cones that you can make coffee in that makes the best coffee. It’s the Pour Over Coffee. And every morning, I get up and it’s like the best experience ever. I fill my house with smells of coffee, and then I drink wine. It’s the best! And it’s only like $9 or something. And it has brought me so much joy.

We’ve probably owned it for a year or something already. And every time I go in there, and I’d make my little pour over and make the bloom, and then bubbles and stuff, and then you’d pour over like in circles, and it foams, it’s like, “This is the most amazing experience!”

So yeah, there’s two things.

And that brings us to the end of it actually. This has just been so fantastic. So thank you to all the participants. This has been amazing.

Vicki: Good! Go roundabout: What am I taking away from the conversation?

Mad Fientist: Oh, yeah, yeah. Sorry, yeah. Let’s go around and say what you’ve taken away from your conversation. And then I’ll wrap it up. So Vicki?

Vicki: Yeah, I just love this! I loved watching these questions that I developed at home alone with a cat on my lap come alive in your story and see how enlivening it is just to have that permission to talk about these sorts of things. So, thank you all very much.

Lena: :I really enjoyed the cards. We could talk a little bit and that gave us some structure.

I think I never really talked to anybody about my plans. Some people know that I’m a little bit financial nerd, but not that what I’m up to. So, I think what I would take with me is that it’s not that hard to start talking about money in general. I don’t want to out myself, but I’m doing this journey at my job or something. It’s just that I want to talk more about money in general.

Jason: The thing that struck me as we were talking just before we get started was just all the different places everybody was from. This particular podcast is a lot less US-centric than my typical reading and stuff.

So, that was one thing I’m going to take a key from Brandon in here and change the rules slightly and [unclear 45:16]. The other thing I really pulled out of this—and I’ve actually been thinking about this a lot as well—is just the idea of how do we get this sort of teaching to people who aren’t as well off.

All of us here probably have had some good advantages rolled our way. We had some good roles of the dice when we started out one way or another. It’s not to say that we haven’t made good use of them, but to fully acknowledge that and how can we help pay it down if you will. That doesn’t sound right… whatever.

Anyway, to help other folks out, especially people who aren’t going to necessarily run into this on their own.

So yeah, looking to help the disadvantaged—and especially kids.

The thing that really spoke to me was that it’s criminal that we’re not teaching kids about money better. It’s just absolutely nutritious. What we can do to make that better is definitely cool.

Brandon: Jason, I think your last comment about children is—a couple of people around the table here mentioned the piece about children and financial literacy. Like I shared in the beginning, I just thought you get your paychecks, pay the bill and spend the rest because I was never taught any different than that.

And so I think it’s really cool to hear other people thinking about “Yeah!” At that point, it’s not necessarily like we need to teach children FI. It’s like we just need to teach children about money and the value of money and how it’s used and how it’s not used.

So, it’s really cool to see other people really thinking about finances and children.

Matt: I’ve been talking to a lot of people this week. I think a lot of people came to FI probably through Brandon’s podcast. And that’s how they got started—I certainly did.

But I think, to a certain extent, the guests you interview, Brandon, sometimes, the audience is a bit like preaching to the choir. I think what we were talking about earlier is the fact that while we’re on here, we will then send out to all of our friends as bragging rights to say, “Listen to this! Listen to this.” And that could probably be one of the most powerful things, that you’re actually sending it to people who have no idea what this concept is, and just by definition, sharing it beyond its normal audience.

Kimi: I think the game is awesome. I think being able to talk about these things and having the diversity of questions is important. That is very good.

But more than anything, the first thing we talked about was the financial mistake. And as we’re going through the table, you see glimpses of recognition and acknowledgment on everybody’s eyes. So it means that we are all in the same place. We’ve all been in these places.

So, that is the important thing, a feeling that we share that is very mutual. Everybody has it. So bringing it there and bringing it out and being able to talk about it may be very uncomfortable in the beginning, but eventually, will pay for because you’re really talking about something that people do understand.

Laura: I think the big takeaway for me is how things can change for the better when you take a bit of a risk and you have FU money.

So, four months ago, I was on my miserable […] journey to work listening to the Mad Fientist, dreaming of the day I would be FI. And I had FU money. And since then, I’ve quit my job, I’ve gone part-time. And now, I’m actually sat with the Mad Fientist on a podcast with all these amazing people.

So I think when you’ve got that financial security, even if it’s not FI, even if it’s just FU money, there’s so much cool stuff you can do.

Meghan: I think, for me, a big throughline from this week has been values and how much you think about FI being about money and how much, really, for me, fairly quickly, it turned into a question of values.

As soon as you strip away this idea of not needing money, and this very bare question of “Why are you here? What are you doing? What do you want?”, for me, that was the most transformative thing with this journey [unclear 48:58] to you need a job. That was our first intro to all these of holding yourself accountable to living the life that you say you want to live. And that’s been the most transformative thing.

And then, throughout the week, the speakers have been saying, “Well, you know, I’m not really talking too much about money in my presentation.” And that’s really been a throughline of it’s much bigger than that.

Mad Fientist: So, this conversation just highlighted the thing that I love most about the Chautauqua. It’s like people come here for the presenters presumably, but it’s everyone that’s here that has the knowledge and the experiences and the stories that teach everyone else so much.

I can’t wait to listen back to this when I’m not actually trying to orchestrate a podcast and just dive deeper into all of the gems of knowledge that all of you have shared. It’s an incredible thing being here with all of you and meeting you and learning from you. And that’s the thing that I don’t think people expect, everybody is learning so much from everyone else. And that’s the really beautiful thing about this week.

So, I just want to thank all of you for being here, one, for agreeing to do this, talk. And Vicki, thanks for putting this together. We’re recording this in August of 2017. But I’m hoping to release this in March of next year to coincide with the release of the new version of Your Money or Your Life. And I can’t wait to read that new version.

So, presumably, it’s out. And you can look in the show notes for a link to it. But yeah, thanks, Vicki for putting this cool game together. There’s so much gold that came out of these discussions. And thank you all for being here.

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Elizabeth Willard Thames – Meet the Frugalwoods Mon, 05 Mar 2018 07:55:40 +0000 Mrs. Frugalwoods joins me again on the Financial Independence Podcast to talk about retiring to a homestead in Vermont and what it's been like making her early retirement dream a reality!

The post Elizabeth Willard Thames – Meet the Frugalwoods appeared first on Mad Fientist.

Today on the Financial Independence Podcast, I welcome back Liz Thames (a.k.a. Mrs. Frugalwoods)!

Liz was last on the show over two years ago and a lot has changed.

Since then, she’s made her dream of retiring to a homestead in Vermont a reality, she’s had two babies, and she’s just published a book!

Meet the Frugalwoods - Achieving Financial Independence Through Simple Living

It was great to catch up with her to hear about everything that’s happened over the last couple of years and to find out whether her early retirement dream is actually as amazing as she hoped it would be.

And since we’ve become good friends since our last interview, it was fun to challenge her on some of her more “borderline” frugal habits and also share my most embarrissing frugal hack :)

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • What’s changed since our last interview
  • Has the Vermont homestead reality lived up to the dream
  • Why you should just start things
  • How to embracing a $0 budget
  • Why you should eliminate everything and then add back the things you enjoy
  • How the Frugalwoods buy things
  • My super embarrasing frugal confession
  • The best way to deal with the long slog to FI after the initial period of excitement
  • How frugality can help build community

Show Links

And since I promised in the episode, here’s a picture of me and my brother in our onesies…

Embarrassing Frugal Confession

Full Transcript

Mad Fientist: Hey! Welcome, everyone, to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence.

On today’s show, I’m excited to welcome back Mrs. Frugalwoods. Liz was last on the show back in December of 2015. We had a great discussion about frugality and all the crazy plans they had of leaving the big city behind and moving to a homestead in Vermont to retire. And they’ve done all that.

It’s now two years later. They have a baby, another one on the way. They have a homestead in Vermont. And they’re living their early retirement dream.

So, I was excited to get her back on the show so that I could talk to her about everything that’s happened over the last couple of years and see if the reality of homesteading lives up to their dream of it.

And I’m also excited to hear about everything else she’s been up to because she just released a book that’s out today. And she was kind enough to send me an advance copy of it. And I absolutely loved it. It actually read more like a fiction book. And it was incredibly engaging. But it was still packed with all the great information that she has on her blog.

So, I highly recommend it. I’ll put a link in the show notes, so you can check that out.

I also have some rapid fire questions that I’m excited about. So make sure you listen to the end, so that you can hear those. I have a few funny stories that highlight the darker sides of frugality.

So, let’s get right into it. This is my interview with Liz from

Hey, Liz! Welcome back.

Liz: Hi! Thanks so much. I’m delighted to be here.

Mad Fientist: So, I looked into it, and it was exactly two years ago yesterday that you were on the show in episode #16. So, it’s currently December 12th we’re recording this. So yeah, December 11th 2015 is when you guys were first on the show.

Liz: Alright! We’re consistent. We should put something on the calendar for two years from now.

Mad Fientist: Absolutely! And maybe there’ll be another baby on the way because that’s something that’s similar between these two recordings.

Liz: I think let’s just go one baby at a time here.

Mad Fientist: So, when are you actually due this time? Last time, you were about ready to pop if I remember correctly.

Liz: Yes! I feel like we recorded right before our baby [Liz] was born. So the next baby—she needs a better name—is going to be born in mid-February.

Mad Fientist: Mid-February. So there’s some time left.

Liz: A little bit of time.

Mad Fientist: Cool! So, lots has changed. I’m really excited that you’re getting back on the show because it’s just been a crazy couple of years for you guys, which I’m excited to dive into. But the most important thing is that you wrote a book. So huge congratulations on that! Thanks for sending it to me.

Liz: Thank you.

Mad Fientist: And it is fantastic.

Liz: Well, thank you.

Mad Fientist: It exceeded all expectations, so well done. And I’m sure we’re going to talk a lot about it. But how does it feel?

Liz: It feels very good. It’s kind of been a lifelong goal of mine to write a book. And then, once I started writing it, I had no idea how hard it is to write a book. Everybody told me, “Oh, it’s really difficult to write a book.” I was like, “Yeah, yeah, yeah. It can’t be that hard. I write all the time.” And it was a very challenging process for me as a writer. And I’m very grateful for it because I definitely grew and advanced kind of in my skill of writing and in my patience level too with my own abilities. Some of the chapters, I rewrote, oh, 15 or 20 times—you know, just a complete rewrite. And so it’s a very humbling experience to write something, send it to your editor, and have them say, “You know, really, just start over.”

So, it was a good experience. I really enjoy writing. And I still enjoy writing even after this process. And so it was eye-opening to me at the level of dedication that it takes to really do an entire book.

Mad Fientist: It sounds like that would kill me. So well done to you for surviving it. So, was it just like having a writing coach pretty much, I guess having an editor who’s scrutinizing everything? That would probably be pretty good for upping your skill level pretty quickly.

Liz: Yes. And I had a fantastic editor at Harper Collins who really understood the mission of Frugalwoods and the mission of what I was trying to convey in the book and helped me to hone and refine what I was trying to say.

What I realized is that, in blogging, I’m able to expand extensively 2000 to 5000 words on one very discreet topic. And you can’t exactly do that in a book or the book would be thousands and thousands of pages long. So, how do you really distill it down to the best kernels and the key points.

And so, it helped me to become, hopefully, a more concise writer too.

Mad Fientist: Oh, it’s fantastic. It wasn’t what I expected at all. And it exceeded all expectations like I said. It was more like reading a novel. You obviously packed in all of the good information that you do have on your site. So it’s also a finance book. It’s a life book and it’s many things. But at its core, I would say it feels like a novel. I was looking forward to reading it before bed and see what you guys are doing even though I know you guys and I know a lot of your story. I was still gripped by it. So yeah… fantastic!

Liz: Oh, thank you. I appreciate that so much. Thank you. I really want my writing to be interesting. I think we write about money and people are turned off by that. And so I really try to make it a story.

My background is in creative writing. And so I try to think, “Okay, what’s interesting to read? And then how can I kind of sneak the finance message in there?” So that’s always my goal.

Mad Fientist: Well, you definitely hit the goal. So congratulations!

Liz: Oh, thank you so much.

Mad Fientist: I actually learned quite a bit about you too even though we chatted two years ago and we touched on a lot of this stuff. But yeah, there’s a lot more depth to it. I could see the struggle. So I definitely want to talk about that.

But maybe for people who have just recently listened to your last episode—which I definitely recommend people doing because this will be like a continuation from that first episode—tell everybody everything that’s changed.

So, last time when we chatted, you’re still working Cambridge, you were thinking about moving to Vermont. You were both working, and you were childless. So what’s today look like for you?

Liz: So, today we are financially independent which I’m very grateful for and very excited about. I quit my job. My husband still works from home because we were able to move to Vermont. He’s able to work from home in Vermont which is really kind of the best of both worlds. So, we moved from Cambridge, which is a very urban area outside of Boston, Massachusetts, and we now live on 66 acres in rural central Vermont, which the Mad Scientist has been to visit. He can tell you just how rural it is!

Mad Fientist: Oh, it’s beautiful. We had a really good couple of days there. And you guys treated us to some of the best beer that Vermont has to offer, which we’re missing since it’s been 2 ½ years since we’ve been in Vermont. So yeah, it’s a gorgeous plot of land. And I still need to get there in the winter, so I can play some ice hockey on your pond.

Liz: Absolutely! The pond is frozen right now. So you be here. It’s snowing pretty hard today.

We’re kind of not any one thing at any given time, which is what we enjoy. So we’re homesteaders on this 66 acres. We also work what I call “computer jobs.” So we both chose to do work that involves us and a computer because it’s very intellectually fulfilling for us to do that work.

And then, we are also full-time parents. Well, everybody’s a full-time parent who’s a parent. But we’re stay-at-home parents to our daughter who’s two, and then our soon-to-be second daughter coming in February.

So, we sort of craft this life that’s very non-traditional, but that really works for us. And that is kind of the ultimate mission of the book and of my blog, helping people to figure out how would you structure your life—your time and your money. How would you use those two finite resources to their best advantage? What do you most want to be doing?

Before this, my husband and I were both working jobs, really good jobs, because that’s what you do. And we were spending money because that’s what you do. We were just sort of bopping along in this lifestyle inflation path that we’ve been on without any real acknowledgement of what it is that we actually want to be doing with our lives.

And so, having that watershed realization was key for us. And that was really the entire linchpin of us achieving financial independence. It was much less about the money and much more about making that determination of what we want to do. And I think once you establish that, your money will follow. You will find a way to craft a life that fits within the means that you have.

Mad Fientist: Perfectly summed up. And I think that’s the thing that people miss with frugality, especially if you’re just depriving yourself and you’re not buying all these things that you could be buying because you have the money, but in actuality, you’re buying exactly what you want, and you can have as much of it as you want. But you also realize that everything is a trade-off, so you don’t just go out and spend like crazy. And that’s the thing that I struggle to get across to my more spendy friends.

Have you found a good way of framing it or do you just live by example?

Liz: I think for me in my personal life, I live by example. My friends know what I do, and I’m sort of a passive resource. So if people want to come to me with questions, I am more than happy to answer them. And I do a bit of financial counseling with friends who approach me. But I’m much more of a sort of live-by-example type of person in my everyday life.

And I think it’s something that we try to espouse in everything we do. And if people are interested in kind of how we’ve structured our lives such as we have, I’m happy to talk about it.

And then, the blog and the book are really where my true zeal comes across. You can really dig into the specifics of what my husband, Nate, and I have done and the ways in which we’ve saved.

And I think what’s important to note—you know, my name is Frugalwoods, and so I talk a lot about frugality, but there is another side of the equation. Income is a necessary aspect of this equation. And I talk in the book about how it’s really all about income, expenses and time. And those are kind of the three variables that you need to bring into alignment in order to work towards financial independence.

The less you spend, the less you need. And the less you need for your lifetime. Obviously, the more you earn, the more you can save. But if you’re making high six figures and spending all of it, you’re no closer to financial independence than someone who’s making $50,000 and saving half of it every year.

So, I think it’s important to keep those variables in mind and understand how you can retrofit that for your own circumstance in your own situation.

Mad Fientist: Absolutely! So, you mentioned that Nate is still working. And back when he was on the program two years ago, he said he really loved his job—and he must if he’s still working now that you’re financially independent and in the words of Vermont.

So, does he still enjoy it as much as he did two years ago? And is he perfectly content continuing on because he’s able to do everything that he wants to do even while working?

Liz: He does, and he is. I think working from home is such a wonderful balance that I think a lot of people can take advantage of now with the way that the economy is trending and the way that jobs are able to be remote. It gives him so much more time in his day.

Just eliminating a commute is transformational. And just having those moments throughout the day where he can check in with the family and see what’s going on and having flexibility to work at night or early in the morning if that works better for his schedule. So, I think having that flexibility has been paramount in making it tenable.

And then, also, he enjoys the work. And I think that’s a really important thing, knowing what is fulfilling for you. I chose to continue working through writing the book. I certainly worked much harder writing the book than I ever did in my day job, let me tell you. And, for me and for Nate, it really was a choice of what brings us that fulfillment and that contentment.

And I am not happy when I am not writing. I can document this for you. Months where I have not written, I am not a happy person. You know how you get hangry, like if you’re hungry, you get angry? That’s me. I get that. Well, I also get this if I don’t write. It’s the same problem.

So, I think knowing that about myself and knowing that I need that work has been a very important aspect of both financial independence, but also of being a stay-at-home parent. I’ve learned that I’m not a person who can be a full-time stay-at-home parent. I really need that work. And I think Nate feels very much the same way, that we both need the stimulation and the engagement and really the intellectual fulfillment that comes from this type of work.

And then, we also love the physical labor of working on our land, the ability to get out there in the woods and either hike or do chores or work in the garden or clear snow. It’s such a great balance of life for us. And it’s very much what we always wanted, that wonderful symmetry of working with your body and working with your mind and spending a lot of time together as a family.

We’re so fortunate. We get to spend pretty much all day every day together which is just really a remarkable and wonderful thing.

Mad Fientist: That’s fantastic! And yeah, we’re going to get into life as it is now and dive a little bit more into that.

But I want to go back to two years ago. On the podcast, you said that you tend to everything in life at once. And after reading the book, I realized that you took that to the extreme pretty much right after we stopped talking.

So, can you talk about that period of your life?

Liz: I don’t know what’s wrong with me. I am continually layering life events on top of life events. And this happens over and over and over again with Nate and I.

And so, I think it’s just how we are. I think we’re both very driven, goal-oriented people. And we have these visions of what we want to bring to fruition. And we don’t have a lot of patience to kind of wait for it to happen. And so we tend to dive in and do a lot of things at once. But somehow, it does seem to work for us.

So, when we talked two years ago, we were just about to have a baby. And I cannot remember if I actually disclosed this on the podcast or not, but we were closing on our homestead at the exact same time. So we had located our property and viewed it when I was, I think, eight months pregnant. And it was the one.

We’d been looking for three years. We’d done so much research into rural homes. And this was it. We could not let it pass us by.

And so, the day that we came home from the hospital was also the same day of the inspection on our house up here. So Nate had to like hustle the baby and I home from the hospital. And so I’m sitting at home with this infant all day. Fortunately, my friend came over to hold her for a while. And Nate had to drive three hours up to Vermont and be sort of mentally alert in order to do the inspection on the property and walk the boundaries and make sure that everything was as we thought it was.

And it was! We went through and our offer was accepted. And we closed on it in January of 2016. And then we moved here in May 2016 with a 6-month old. And I was writing my book at this time as well. I continued on with writing my book. And then now we are having our second baby and my book is publishing a month after she’s born.

This is very much the trajectory that we often find ourselves on. I talk about it a little bit in the book where Nate and I would kind of make a decision to move or take new jobs or start graduate school. And it would happen immediately. I’ve looked back at our calendar, and it’s something like we make the decision, and then the next Monday, it would start.

I think that there’s good in that and bad. So I’m not necessarily advocating for this approach. But what I will say is that we very much have a philosophy of start now and don’t look back. You can waste so much time questioning if you want to do something or not. You can spend years deliberating about whether or not you want to change careers or pursue another degree or move to a new location. And that’s all sort of lost time. I think that’s very much the way that we view it.

And so, we might be a little extreme. I don’t know that you should necessarily write a book while you have two small children. But I also think that it’s very possible. And I think that sometimes we limit ourselves mentally because we think we can’t handle things. And I can say you can get a lot done in very short periods of time if you really want to be doing it and if it’s what you want to do.

The other day, I think it was in a 20-minute timeframe, I wrote something like 2000 words because that’s the time I had. I had to go back and edit. I mean, there were a lot of typos. But if you want to do something, just do it. And that’s really the philosophy that we live by.

And I would say I need to personally need to work on maybe tempering that a little bit. But I think it’s really useful in a financial journey. If you decide today that you want to work towards financial independence, start right now. Don’t wait until your next paycheck or until next season or until after Christmas.

That doesn’t make any sense!

Mad Fientist: Yeah, January 1st.

Liz: That doesn’t make any sense. That’s just lost time. Those are mental roadblocks you’re putting up where you could be making actionable progress starting this moment.

And I kind of enjoy that life philosophy because it lets me live without regrets. I really kind of do all the things I want to do. And sometimes I drive myself a little bit crazy, but it is an opportunity to recognize how much you can accomplish. And it’s also an opportunity to simplify.

So, I’ve radically simplified our lives in the last few years. There’s a lot we don’t do. There’s a lot we don’t own. We have a very simplified home and a very simplified routine.

And that’s kind of what lets us do these other things. I’d much rather be writing than dusting a bunch of knick knacks. So I just don’t have any knick knacks. You can make those trade-offs in your life. And you can make those very conscious decisions.

Mad Fientist: Even simple things that seem insignificant. In your book, you talk about throw pillows on your bed. You put them in the basement in your place because you’re like, “It just wastes my time. Every day, I have to take them off before bed. And then put it back on after I sleep.” It’s just like they don’t bring you that much joy.

Liz: Oh, a hundred percent. And you’re like, “Throw pillows? That’s five minutes!” Yeah, that’s five minutes, people. And if you kind of identify all those points throughout your day, it’s incredible how much you can get done.

I don’t brush my hair in the morning because it’s good. It’s up in a ponytail. It’s totally fine. I save time by doing that. I mean, it sounds a little bit ridiculous. But honestly, it really works for me because it lets me spend more time with my daughter. And that’s what’s important to me . I’d much rather do that than have coifed hair. Also, no one cares on the homestead. It’s not like the deer walking by have any opinion.

Mad Fientist: Right, yeah. That’s one of the great things about Vermont, just heading up to the shops and looking like an absolute state and not worrying about it because most people are covered in mud or whatever.

Liz: Et cetera… I have to say that living in Vermont very much facilitates like a simplified, frugal lifestyle because everyone here really kind of is focused on their highest and best priorities. There’s very little pretense. There’s very little consumerism. And there’s very little stock put into appearance.

And so, it’s funny. We’ll go somewhere, we’ll get there, and I’m like, “Oh, my gosh! We’re kind of scruffy. I don’t think I bathed my child.” And then we get there and I’m like, “Oh, it’s totally fine! Everybody else is in the same boat.”

Mad Fientist: Yeah, absolutely! I do miss that. It’s a good way to live.

So, you mentioned that you were planning this for years and looking for your perfect Vermont homestead. And then, all of a sudden, you found it. And pretty much, you’re there. It all seemed to happen very quickly. And your dream was realized.

And sometimes, when that happens, the dream wasn’t as you expected. Sometimes, it’s better. How did you find it? I know you’ve been there for over a year, so you have some sense I guess of what it’s like. But do you feel it’s exceeded expectations? Were there things that you would feel or think that you don’t?

Liz: I would say, on the whole, it has exceeded expectations and really been better than we could have imagined. However, I will give a caveat. That didn’t happen until really after we moved here and had lived here for a couple of months.

When we first bought the property—and I talk about this in the book. And I’m not going to tell the sort of terrifying experience that happened to us that made me think that this was a really bad decision with like a 2-month old baby. Suffice it to say, when we first came up here to close on the property, I very much thought we were doing the wrong thing, and I was extremely concerned that we’d made a really big mistake. I was very nervous about moving here. It is a very rural property. You cannot see a neighbor. The neighbors are miles away. We are deep in the woods, which we love, but we were going from an extremely urban environment and I got extremely nervous so much so that, on the way to the lawyer’s office for closing, I almost told Nate, “We can’t do this” because I was so overwhelmed at the prospect of this home.

And so, the reason that I was able to go through with it is that I did not want to live with the regret of having not done it because I knew what it felt like to live in the city and work those jobs that were not fulfilling to us. So I was able to sort of see past the moment of panic that I was in and understand that it was going to be okay.

But I mean, it was quite a gamble. It’s quite a gamble when you change your life so radically. And I think what gave us confidence again is the backing of financial independence. Nate and I like to say at the end of the day, “Okay! So it was a bad decision. What’s the worst that happens? You lose money.” You sold the house for a loss, and you’re out that amount of money out of your net worth.

That to me is the ultimate reason for financial independence, options.

Mad Fientist: Absolutely! The same thing happened with our Vermont house. It wasn’t selling. And then, we were like, “You know what? Just leave it here. We’ll go to Scotland. We need to get to Scotland, so we’ll just leave it there.” And then, it was like winter. It was coming. I was so stressed out about it. Little did our buyers know I probably would’ve given it to them for like $5 or $10 because I was just like, “The stress is not worth it. I’ll just take the hit. It doesn’t matter. It’s just money. I can’t do all this anymore.”

So yeah, that’s absolutely one of the best parts, being able to just realize that, hey, it’s not the end of the world if this doesn’t work out. It’s just a bit of money.

Mad Fientist: Oh, yeah. That to me is the most liberating thing when I can have that realization like, “It’s just money. It doesn’t matter.” Putting yourself in that position is to me transformational.

And so, people ask, “Why would you save 80% of your income?” I’m like, “Let me tell you… so I don’t have to worry about money ever.” It’s the most liberating thing in the world.

So, we got past that. We moved here. And then we were in this race to get things done. When you live on 66 acres, it’s an endless to-do list. I mean it’s nonstop with the work that you need to do outside, let alone anything you want to do inside the home like, for example, unpack dishes or organize your kitchen.

So, that was a challenging first few months of really trying to kind of do everything. And we’ve finally came to this realization that, at a certain point, you have to arrive at your life, and you have to just say, “I’m here, and I’m going to step back and enjoy it.”

And coming to that realization and really embracing that philosophy has been a big part of our first year and a half here. And we absolutely love it! We just could not imagine ever leaving. I can’t imagine that we haven’t always lived here. And we are so thrilled with being here.

But I will say it was very nerve-wracking at the beginning. Really, anything that’s worth doing I think is going to be difficult and scary at the outset because you’re taking a risk. But what’s the point if you don’t take these risks and if you don’t do these things in life? You’re always going to wonder or regret or wish that you’ve done these things.

Mad Fientist: Yeah. If it’s scary and really intimidating and you don’t want to do it, then you should definitely do it because it’s likely going to be worth it.

I’m so glad you guys did and are so happy. And when I read that part in the book, I just was picturing what would have happened to Nate if you said, “We can’t do this” after all those years of researching and stuff. It seems like you both are really detailed and scrutinizing numbers and so many different things to get to that point. I just imagined his head would have exploded if you were like, ”No, I can’t do this actually.”

Liz: Well, you know, actually, I’m married to a very zen person. If he had told me that, I would have lost it. if I had told him that, he would have said, “Okay… let’s talk it through.”

And so I think it’s important to know your strengths. Calmness is not really my strength, but it is Nate’s. So, in that way, we’re really able to balance each other out.

And I think being respectful of what your partner wants is an important tenet of working on this type of journey together. You need to really take into account what each person needs and wants. You can’t to a homestead in the woods if one part of the partnership does not want to be there. It’s not going to work out. You need to be on the same page.

And so, for us, choosing this dream together, choosing this home together, and then ultimately deciding to actually drive to the lawyer’s office and sign the papers was all very much a joint decision.

And also, I think in a partnership, you do have to think about what’s going to make your partner happiest. I’m happiest when he’s happy. And he’s happiest when I am happy. And so I think recognizing that and balancing that has always been important for us.

And it’s also true that then, your kids are happy. It of reflects throughout your whole home if you are able to live kind of a content lifestyle.

Mad Fientist: Yeah, definitely. So, you have your Cambridge house or a house in Cambridge, Massachusetts. So, when I talked to you last, you were planning on renting that out once you get the homestead. And you were planning on managing it yourself. I was just wondering how that’s going, if you’ve decided to hire out the management to someone in Cambridge.

Liz: That is going really well. We have been just thrilled with how that has worked out. And we did decide to hire a property manager which has been an excellent decision. We’re about three hours from Cambridge which is kind of on the edge. You could manage it yourself. But what we came around to realizing is that, ultimately, it’s money. And it wasn’t worth the time to us. I didn’t want Nate to have to be driving six hours in order to fix a leaky toilet which is exactly what would have happened.

And so, for us, it’s very much worth it to pay a property manager. And what we pay is—I think it’s a flat rate of $105 a month which is a really great rate for property management. So what I would say is if you’re looking for a property manager, call around to a lot of different managers. I found just wildly different rates in Cambridge and wildly different levels of service. And I think it’s a question of what do you actually need for your property, how much are you willing to do versus how much they’re going to do. And something like going down to clean in between tenants, we are willing to do that. But again, the leaky toilet in the middle of the night, we are not willing to do that. And so, outsourcing that to the property manager has been a great decision.

They also listed the home and rented it out for a higher price than what we would have asked. We’ve been doing a lot of research on the market to try and figure out where we would fall. And they priced us a couple hundred dollars above that. And they were able to rent it out to the first people they showed it to. So, I was like, “Great! You have earned your commission!”

Mad Fientist: That’s fantastic! And is it pretty much completely hands off for you guys then?

Liz: It is! So far—you know, we’ve only been doing it for a year and a half—it’s been a really passive source of income. And it’s really generating revenue at a great rate.

And I think one of the reasons for that is just the market in Cambridge. I’m very cautious about recommending real estate investing because—and I’m sure you’ve talked about this too—it’s so dependent on the market and the pool of tenants that are available to you. And I think Cambridge is great because there are a number of universities there. And there’s also a burgeoning biotech industry there. Places like Google and other tech companies are also headquartering there because of their proximity to MIT, the Massachusetts Institute of Technology. And so, there’s kind of this upswell in the market.

And it’s also a very constricted housing market because there are a lot of historical regulations in Cambridge. And so there’s just not enough housing. And 60% of units are rented.

So, when you kind of look at all those variables, it’s telling you this is a good place to be a landlord.

And so, I think before you make a decision like that, as you know, it is not always a revenue-generating proposition. And so I never want people listening, “Oh, yeah. I can rent out this place in rural Vermont and make tons of money!” Probably not. I always want to kind of temper my enthusiasm for it. You need to have a deep knowledge of the market that you’re looking at.

And when we bought in Cambridge, this was our assumption, that that home would become a rental. And so we really bought with an eye towards renting it out, not with an eye towards it being our forever home.

Mad Fientist: That’s definitely a mistake I’ve made in the past. We’ve owned two houses. And each of them were bought just as like, “Ooh, this is going to be a great place to live.” And both ended in so much stress for me.

So, I said to Jill, I was like, “If I ever buy again, my first priority is that it’s a good rental investment because then if we do want to leave in two years, we don’t have to worry about any of this stuff. It’s hopefully a sound investment we could cash flow and not have to worry about selling if it’s a bad market or whatever.” And yeah, I think that’s a great piece of advice.

Liz: And I would say that we did very much the opposite with our Vermont home. I mean we consider this property zero dollars in our overall net worth. Even though it’s a great house and a great property, these rural places do not necessarily appreciate. They do not even necessarily stay static. And they certainly don’t sell quickly . It’s very unlikely that it would be a successful rental, probably impossible.

And so, we very much bought this place like, “We just want to live here.” And it’s worth zero dollars.

So, I think having that awareness when you’re buying, like “Am I buying this with an eye towards rental? Is this a great market where I could reseller? Or do I just really want to live here?” And it is not a bad thing to just really want to live somewhere. But then I think you have to understand what kind of investment it is. And for us, it’s an emotional investment in where we want to live, whereas the Cambridge house, I can’t say that we like loved that house.

Did you ever visit us there? I don’t remember.

Mad Fientist: No, I didn’t.

Liz: No. It’s kind of an awkward home, but it works really well as a rental because it’s a single family. And in Cambridge, a lot of units are condos. And there are a lot more restrictions on renting out condos in Cambridge than there are single family properties. So, we could have gotten like a much nicer condo to live in, but it would not have been as good of a rental opportunity.

So, again, having that awareness before you buy I think can be really helpful.

Mad Fientist: Yeah, no, definitely. And yeah that’s where we made the mistake for us. We knew that we would probably be there five years max. So it’s like, “Okay, this is not our forever home. And it wasn’t going to be a good rental.” So then it was like, “Oh, we want to leave right now. But it’s just not a good time to sell” and things like that.

So yeah, just knowing where you are in that space and having it all upfront in your mind and know what you’re going to do in that situation is I think key for not having all the stress that I had.

So, when we chatted last time, I think both of you said that frugality is a lot easier when you have a goal. So when you had the goal of buying your Cambridge house, that was easy to be frugal, and you were able to save a lot of money. But then once you bought the house, then you sort of got off the path. But then you realize that you wanted to retire to a homestead in Vermont, so then you have this other goal, and then you got super frugal again.

Do you have a goal now? Or is it so deep in your being, frugality, that it just comes easily?

Liz: I think it’s more that frugality is so ingrained in our lifestyle that that’s just the way that we live at this point. I would not say that we really have a concrete goal. I would say we have kind of personal goals, where we want to see our net worth go and the things that we want to do with our money.

We started a donor advised fund last year which is a tax advantaged charitable giving vehicle that I highly recommend if people are looking for a way to lower their taxable income. And that was a big priority for us, to be more strategic and mindful about our philanthropy. and that’s something we’d like to do more of in the future.

And so, I think we have monetary goals around that and around some different things we’d like to do around the property and in our community.

But overall, no, I would not say that we have another big goal. I don’t ever want to move again I don’t think for my entire life. No, I’m sure someday. But I think for us, it’s really just maintaining and creating this life that we want to be living. Our family is still growing, and so we’re very much kind of in those transition phases.

And at this point, frugality just brings us so much happiness and is so very much the way that we live that it’s natural for us.

And I would also say that we spend more money now than we did when we were working towards financial independence. And I think that that’s just kind of a course correction that happens over time. So, your first month of frugality, you’re going to probably save more than you will for years from that point. And I think that’s fine.

I think the key to finding tenable frugality is to first eliminate everything, and then to kind of add back the things that you really enjoy. Nate and I go out for dinner once a month now on a date which we did not do back when we were working towards financial independence. We spend more on farm equipment now because we need things for our property and it makes our life easier to have an apple cider press or a wood splitter or pallet forks for our tractor, things like that. We spend the money because it’s going to enable greater frugality and it’s going to allow us to live out here more sustainably and make our own hard apple cider.

So, I think our spending is certainly higher, but it is not at a level where I feel like it’s on frivolous things. So I think if you always have your parameters of goals-based spending guiding you, you’re going to arrive at a really good place with your frugality.

And I think it’s also not a static thing. Inflation, your family size increases, your needs increase, or they decrease. And I think you need to just be aware of that and you can keep an eye on your overall net worth and you can keep an eye on what your income is at that point and where you are in your journey. And you can adjust your spending as it’s appropriate.

Mad Fientist: Yeah, that’s exactly what I found as well. Our spending has definitely increased, but nothing worryingly. And I’m not worried about it because so many years of frugality, I know that I’m spending on things that make me happy and not anything more.

And I think it’s been a huge gift. I think it’s just being able to relax a bit because, before, I was super scrutinizing everything—just like I know you were. And now, it’s like, “Okay, just relax. You got this down. You know what you’re doing. So don’t stress about every single thing because, overall, you’re doing great. And it doesn’t matter if you spend an extra hundred bucks a month than you did a year ago .

Liz: Right, exactly.

I think, again, it’s like if you have that goals-based spending at the forefront, it’s kind of immaterial.

And also, for me, I think I’m moving into sort of being more of a minimalist. I think this is a new phase for me where what I’m recognizing is that I love the simplicity of frugality. And I really like owning less stuff and having less stuff that I need to care for and be concerned about.

So, I’ve been getting rid of a lot of things. I think it’s also because I’m pregnant, and I just do this when I’m pregnant. So talk to me again in a couple of years. I might feel differently. But frugality has made me a less stressed person because I’m just not worried about as many things in my life. Like it’s the Christmas season, and I do not feel stressed because I’m not buying gifts for my husband or daughter. I got her stuff at a garage sale like six months ago. She has no idea. So for me, it’s just a very stress-free time. And I’m like, “This is great! This is how I want to live all the time.”

So, for me, I think the goals have kind of evolved to be a little bit less about money and a little bit more about time and mindset and mentality and how do you find that inner peace and that inner serenity that I think stems from financial independence, but also stems from using your time exactly as you want. And frugality allows me to do that.

And so it’s kind of this whole cycle for me of spending less, needing less, desiring less, and then being happier with less. And I think that’s the ultimate destination for me.

Mad Fientist: Absolutely! We just actually utilized our minimalism just last month. It was time for our lease to be renewed. And the property management company emailed us and said, “Do you want to stay?” and we’re like, “Yeah, we like it. So we’d like to stay.”

And then, they replied and said, “Oh, the landlord has chosen to increase their rent.”

We’ve only been here a year, and were great tenants, so I was like, “This is crazy!” But of course, what they’re thinking is that we have all this stuff, we moved in, we’re settled. And for us, we could just have two small car loads and be out of here and be somewhere new.

So, I replied, I’m like, “No, we’re not going to spend any more. We can leave on February 2nd” or whatever our date was “…or we’ll just keep paying the other rent. It’s up to you guys.”

And she replied so nice. It’s like the nicest email I ever received from her. She’s like, “Oh, yeah. That would be great. You can stay.” And I said, “We’ll stay until May. And then we can reassess then.” She said, yeah, we can stay until May, “And I’ll be in touch soon.”

So, it was just like a 180. She thought she had all the power. And it’s like, “No, we have nothing. We could be out of here in two hours.”

Liz: That’s awesome. That’s awesome. No, I’m envious. I am not that minimal. Let me tell you, I could not be out of this house in like two weeks. So yeah…

Mad Fientist: Yeah, moving across the ocean twice is the best thing ever for not accumulating a bunch of stuff. It’s just like you do that twice, and you’re like, “I never want anything ever again.”

Liz: Like “I’m done. I own nothing.”

And you are the perfect embodiment of having that ability and holding the power. I think, in a lot of dynamics with a landlord or with an employer, they assume that they have the power. And you, time and time again, have shown them, “Actually, no. I don’t need this job. I don’t need this…”

Mad Fientist: Exactly! And that’s the thing. That’s the thing that I didn’t realize on my journey as much as I wish I had, just the power that that gives you and how it makes you so different from any one else and how you can utilize it just like I did with my landlord right there and like I did with my job.

You should utilize that power because you’re very rare if you have more than a few months saved up, let alone a few years or a decade.

Liz: Or a lifetime, yeah.

Mad Fientist: Exactly!

Liz: It’s incredibly liberating. And it really lets you make decisions because you want to.

Mad Fientist: Yes, absolutely. And that’s the best part.

Liz: Yeah. There’s a lot that we don’t do because we’re like, “Well, no, nope. I don’t want to do that.” It’s kind of like having a property manager for us. It’s like, “No, I’d much rather spend that than be driving back and forth.”

Mad Fientist: Yeah, exactly!

So, you were a bit more extreme at the beginning, as you said. So in the book, you talk about the zero dollar budget. I just wanted to chat a little bit about that because I think it’s a really powerful mindset shift.

Is that still similar to the way you think now?

Liz: Absolutely! And part of this stems from laziness. I do not want to sit down and create a budget every month. That would take a lot of time. And it sounds boring. And I think I would be setting myself up for failure. I don’t see any point in creating a budget because it is very much a zero dollar proposition for me.

So, any time we need to buy something, Nate and I have a process that we go through. We discuss it. If it’s a big purchase, we’re going to talk about it for a very long time, like buying a car, for example. We bought two cars in 2016. We have been talking about those cars for, I don’t know, five years maybe. And so by the time we came to purchase them, it was very easy to pull the trigger.

The same thing with buying both of our homes. The decision to actually purchase was made pretty quickly because we’ve been thinking about it, talking about it, and researching for years.

So, with large purchases, we spend a very long time. And then the time is kind of correlated with the size of the purchase price. So depending on how expensive it is, that’s going to be correlated with how long we discuss it and research it.

And our first step is always to wait. I never advocate buying something immediately—except for groceries which you’re going to need to buy pretty quickly. But I never buy something in the moment that I think I need it. I write it down on a list, and then I wait a while—at least two days. Even for seemingly insignificant purchases, I wait and I just see do I actually need this or was this just like a flash in the pan like, “I need this right now,” and I don’t actually need it. And I look back at the list and like, “What even is this? Why is this on here?”

If it is something that I feel like we really need, then I start to try and figure out if we have a substitute. Is there something in the house that can suffice, that we can use instead. Is it something that we’re going to need just once, like a tool, or something very specific that we could borrow from a neighbor? If so, borrow it, be done with it. Great!

If we’ve gone through all these exercises, and we feel like we still need to buy this thing, we start looking for it used. So I check Craigslist, a buy nothing group, which I highly recommend you join or start in any city you live in. I look on Facebook buy and sell groups. If you have kids, those parent buy and sell groups are just a gold mine. I get most of my baby stuff from there because people are looking to offload things. And it’s typically a better price in Craigslist. And it’s a better selection because there’s usually more people posting stuff.

Also find your local parents’ buy and sell group. I just got a changing table and changing pad and a diaper pail for like $15 which normally would be like a $300 expense. So I’m like, “Yes!” Then I almost could not fit it into my car, so there was a moment of stress. But I got it. I turned it around the other way.

But anyway, when you start to buy things used, you will recognize the depreciation curve is astronomical. It’s just on real how cheap you can get things used versus buying them new.

We live in a very snowy climate. We always need snow gear. And our child is constantly growing and eating a different size of snow gear. So anytime I see high quality snow pants, boots or coats at a garage sale, I buy them. I buy them in whatever size they are. And I get [lands] and $60 snow pants for $3. And that’s the kind of stuff where, to me, it’s just, “Why would you buy it new?” It’s so much fun to find it used.

So, utilizing the used market is one of the best tips I have. And then if it’s something you can’t find used—for example, the pallet forks for our tractor—do your research and find the best price, and then buy it. And don’t feel bad about it because you’ve spent all this time researching and thinking it through. You don’t have buyer’s remorse. Then you’re not questioning whether or not it was something you need to buy.

So, in that way, everything we buy is pretty mindful. And it is something that we ultimately do need.

Now, that’s not to say we don’t buy useless stuff. That totally happens to us. But usually, they’re pretty small purchases. I can’t say that we regret any of our large purchases.

Mad Fientist: Nice! So, let’s go back to when you realize that this early retirement was going to be your goal, and you’re doing all this cutting, and you have the zero dollar budget, and you’re probably all amped up, but then you realize that, “Hey, I’m pretty optimize now. And now I’ve still got a few years before this is actually going to happen.”

And there’s a quote in your book. You said, “I wasn’t living. I was just marking off days.” I think that a lot of people find themselves in that same situation. They find the idea of financial independence. They’re all excited. They start making these drastic changes that are increasing their happiness. But then they realize they have a long time to go.

What’s your advice for somebody in that position? How do they keep from just marking off days and not really living life anymore, just waiting for this end goal?

Liz: Yes. That was the hardest point for me. And that was one of the hardest parts of the book to write because I just felt depressed in that period of time. And so in order to write that, I kind of had to go back into that depressed time and remember how I felt—which is not super fun.

It’s difficult. You do, you have this heady euphoria of like, “Yes! Financial independence, I am rocking this,” and then you go a couple months, and you’re like, “Okay! I have done everything. I got my index funds. I’ve got my 401k. I’ve got my savings. Okay!” and there’s kind of nothing left to do with your money, so then you’re just sort of stuck sitting in your apartment wondering what to do next.

So, I think, for me, it was really important to have an outlet. And so my outlets during that time were Frugalwoods, the blog. And I really poured a lot of energy and enthusiasm into that.

Writing is my passion. Writing is what I’d always wanted to do and what I had not been doing because I always thought I didn’t have the time to do it. I had the time to do it. I just was not optimizing my time.

So, I think after you optimize your money, start to optimize other parts of your life and start to figure out how you like to be using your time. Pursue hobbies that you have not been able to do. Take on new projects that you previously thought you didn’t have time or money or energy to do.

And I think by focusing your efforts in other areas, it’s much more tenable to kind of get through that slog. And I think what it also does is it gives you a destination for financial independence.

So, for me, what I realized after I quit my job, “Oh, I’m going to be a writer.” And that was a very clearly articulated goal for me. And so it wasn’t just about reaching a dollar amount, which I think can become a little bit of a grinding goal. For us, those dollar amounts just kind of flew by, and we’ve kind of passed them by, and then it’s like, “Oh, that’s cool!” because we’re so focused on what we want to be doing with our lives.

And I think that that’s a really important thing. I think you’ve actually written about that really articulately, that you need to be retiring to something, not just from something.

So, figure out what those passions are as you’re waiting. So, for me, writing the blog was transformational. And also doing yoga, I got really into doing yoga at that time because I needed a physical outlet. And so I volunteered at the front desk of my yoga studio and got free classes. And that was another excellent way for me to kind of fill my mental energy and fill my space while I was waiting.

Mad Fientist: That’s fantastic! Yeah, that’s great advice. Did you ever feel like you’re in the deprivation zone? I know that happened to me. I was in a similar situation as you. I was like, “Oh, man. I’ve still got years to go. I’m not happy.” And the depression was just like growing, and I wasn’t content with anything. I was like, “Well, I’m not happy now. But I guess I will be happy when I hit FI. So I’m not going to spend money on anything,” which then obviously made me even less happy and it was just like this cycle.

Did you ever feel like you were depriving yourself with your extreme frugality? Or did you feel that you at least had that under control?

Liz: For me, the frugality was kind of the easier side of things. For me, it was much more difficult to keep working the job I was working and living in the city I was living in. That day to day reality, it’s like, “Oh, I’m imagining this life on a homestead, and yet here I sit in my cubicle.” And so, that was the hardest part for me.

Somehow, the frugality part was easier. And I think it’s because it is such a measurable goal that I really loved seeing how much we were saving every month. And so I was so motivated to get to the end of the month. It’s like, “Yeah! We spent so little.” That was kind of a motivation for me in and of itself.

But just going through the days and the weeks was hard for me. And what it ultimately did though is it made me so much more grateful to be in the position I’m in now. And I think one of the things I like to highlight and that I talk pretty extensively about in the book is the privilege of doing this.

I think there’s so much privilege in being able to pursue financial independence. There are so many people for whom working two and three jobs still does not cover their basic needs. And so the thought of putting away this much money is wholly divorced from their reality. And I’m very cognizant of how lucky Nate and I are, and how much privilege we have coursing through our lives—from the parents we had, to the educations we received, to the careers we enjoyed. It’s a really fortunate position.

And so, I didn’t want to lose sight of that, like, “Oh! So you don’t like going to your well-paying white collar job? Too bad! How sad…” And so, being able to step back and understand just how fortunate we were to pursue this lifestyle, and now how fortunate we are to live it out, is what I try to reflect on. And having that gratitude and then having that empathy for people for whom daily life is such a struggle that these types of dreams and questions are not even possible for them and just recognizing how lucky it is to even have the ability to craft a life you want.

Mad Fientist: Yeah, you have an excellent post called Deprivation versus Abundance. And I think that’s a really good one to read for anyone who is feeling like they’re depriving themselves or maybe just cut too much and aren’t happy.

I mean for me personally, travel has been huge with that. You go to these countries and you realize how much privilege you actually have. It’s easy to gloss over it when all your friends look the same as you and all your family are doing the same things. But when you get to some other country, it’s like, “Wow! They’re working so hard every day just to get some rice.”

It puts it all into perspective, focusing on that and focusing what you do have, not that goal, that FI goal that’s maybe five years away, but actually realizing, “Hey, I’m actually working on these things, I am working on these skills that allow me to do these things that I want to do. And I’m able to put food on the table,” focusing on that rather than the thing that you actually want.

And I think in my post you say something like greed versus gratitude, having gratitude for what you do have rather than being greedy for what you don’t yet have. I think that’s an awesome thing to keep in mind during that stage.

Liz: Absolutely! And I think what it also does is it kind of enshrines frugality and simplicity into your life because you recognize that you don’t need a lot, and that you can be happy with less, and that you can, as a result, give away more, and that you can find ways to impact your community and be helpful in that way.

Mad Fientist: And you mentioned community there. That’s something that I came across in the book that, one, I realize that’s lacking in my life. I’m a city dweller right now. We always move every two or three years. So we never really put in the effort to develop a community. But it was really cool to read how your frugality has helped you foster a community in Vermont. And it sounds like Vermont, it would be a bit easier than in Cambridge. But you gave the example I think of you could pay to have your dog watched while you go on vacation, which is just an expense, but then otherwise you could maybe create a community of dog owners in your local town, and you can all make a pact and say, “Whenever one of us is on vacation, we’ll watch the other one’s dog,” and then you’re saving money, but then you’re also helping other people in your community which makes you happier. You’re also fostering this community of people that you may not have had before.

I thought that was really cool. And that’s not a link that I’ve actually put together before, how frugality can foster and help you improve your community.

But can you give maybe some examples of how you’re doing that in Vermont?

Liz: Absolutely! The dog example is great. And we have availed ourselves of that for years. We’ve actually never paid to board our dog.

And I think recognizing that barter and trade is not dead. Our modern economy has created all of these opportunities to pay people to do things. But what we forget is that there’s a lot of people who would rather not be paying to do these things. I would much rather trade with you. And so, bartering and trading with my yoga studio is a great example, with dog watching.

I think in a rural context, it’s a little bit more at the forefront because it’s something that people are more accustomed to. But I would say that it’s entirely possible anywhere in any suburban/urban/rural areas because people are interested in building that community.

I think, especially in the US, we’ve come around to this idea that our unifying activity is to be consumers. That’s kind of the one thing that we all do. And when you step outside of that loop and start to realize that’s not true, you will find other people who are also interested in building deep connections and in working together and in being collaborative.

And so, what we found out here is that people are so much more open and willing to help you and also to ask for help and to be very frank, “Could you come over with your car and help us move?” or “Could you come help us move these pieces of furniture?” or “Could you come help us repair this well? We need to dig a ditch.” These are all things we’ve done, by the way. These are all real life examples.

And similarly, we say to people, “Could you come over and watch our daughter while we go to the doctor?” We’ve been able to sort of create these relationships where you are able to offer your skills to people.

So, one of the things we bring to rural Vermont is our tech skills. And so Nate is kind of like the tech guy. People stop by, call up with tech questions. Yeah, you need your Internet installed, you need your phone set up, we’re here for you.

So, I think finding what you can offer to your community, and then being very honest about what you need help with—people are very excited to help and to be part of your life. And I have been so pleasantly surprised by how much community we’re surrounded with out here.

And again, in a rural context, you really kind of need each other because goods and services and stores are very far away. And there’s a lot of work to be done out here. And so not a lot of money changes hands, but a lot of projects get done together.

Nate helped some friends move a wood stove from one person’s house to another person’s house. I don’t know how you even hire someone to move a wood stove. So they just got some guys together and were like, “Can you just come over and help us move this wood stoe?” “Sure!”

It’s things like that, just being open to it. And I think being available in your community is really important to us. And it’s something that we enjoy and have found a lot of deep fulfillment from.

We’ve created relationships with people of all different ages, which is another element of frugality that I really love, these intergenerational relationships. People know so much! Our friends who are 60 and 70 and 80, they’ve had incredible lives, and they have so much to offer us. Likewise, our friends who are 9 and 10 are just fantastic and hilarious. I looked out one day, and one of them was on the roof of our barn. I was like, “Okay… well, they got up there, they’re going to be able to get down.”

So, I think opening yourself up to that diversity of community is a wonderful thing. And it really does facilitate not only frugality, but also, I would argue, just a more fulfilling life.

Mad Fientist: That’s very cold. And yeah, that’s definitely going to be a focus for us over the next few years once we get citizenship here and we realize where we’re actually going to settle down. I think that’s the one thing that’s lacking. And as we said, it’s super important for overall happiness.

So, for someone who is a big achiever—and I can see that you’re maybe a type A personality and like setting goals and achieving goals—you’ve got your homestead in Vermonth, you’ve written your book, what’s next? And do you have a next? And if not, how do you feel about that?

Liz: Oh, my goodness! So, it’s true. I really try not to be type A. But I found that it’s actually very hard to change your core personality.

And so I quit working, but I just kind of translated my type A over into other things, which I have to be okay with because it’s very hard to fundamentally change who you are.

And so what I’ve tried to do is incorporate more simplicity and peace into the type A that I truly am.

Mad Fientist: So, how do you do that?

Liz: How do you do that?

Mad Fientist: Yeah. I feel like we’re quite similar.

Liz: A very patient spouse who grounds you and reminds you of how you want to be versus perhaps how you are being. And it’s something that Nate and I have a very open line of communication about. And he has his things that he works on as well that I help him out with, don’t worry.

And so, I think recognizing that you need that help from people to understand like, “Okay, this is a type A thing. You need to let this go,” I’ve really been able to do that by understanding how much happier I am when I am not stressed out all day long and recognizing how much happier I am when I make time to hike every day and to do things that I enjoy every single day.

And for me, it’s creating some really strong boundaries around my time, which having a child, like you are a hundred percent set, they will do that for you. And so having our daughter has truly helped me because I have these blocks of time during which I can “work” at my computer, and then I have blocks of time where I’m with her and blocks of time where she and I do household chores together or we play outside. And so my day is very structured in that sense. And so there are a lot of boundaries around what I can and can’t do.

I also have a strict bedtime. So Nate and I go to bed same time every night no matter what. And that’s really important. I used to think, “Oh, I’ll just stay up another hour, another hour. I can get all these stuff done. Okay, so it’s 1:00. Well, it’s kind of bad, but…” So having that strict bedtime puts just a real parameter on my day. We go to bed at the same time, we get up at the same time. And I think that helps me facilitate a little bit of a calmer approach.

And in terms of what’s next for me, having a baby, having the book published. And then, I do have some plans for Frugalwoods for the future of some new places, new directions, that I want to take the blog.

Mad Fientist: Very cool!

Liz: And I’ve gotten into doing a little bit more sort of what I would say maybe financial literacy. I don’t know if I want to say “financial education” because I’m not a formal educator. But I have an Uber Frugal Month Challenge which is a month-long free challenge to help you identify your goals and save more money than you ever thought possible. I guarantee you will save more money.

And having that Challenge, I’ve really enjoyed that because I’ve gotten e-mails and actually handwritten letters from people about how this has saved their marriage or transformed their lives or allowed them to pay back debt or sort of claw out of a depression that they felt around their finances. And that to me is why I do this work. It makes me so happy, and I get so excited when I read these letters.

And so, I want to expand my work in that space and expand my work in offering people some actionable advice on how they can transform their lives.

So, after I have the baby, and the book comes out, hopefully I will be able to focus a little bit on that.

Mad Fientist: Very cool!

So, I’m going to throw a few quicker questions at you. Do you have any frugal hacks that you recently found. I have one that I’ll share after which is super embarrassing, but it’s amazing.

Liz: I feel like I write about frugal hacks a lot, but I don’t know if I have—oh no, I have one. Let me tell you what.

Okay! If you pay for a good or a service to be delivered to your home—for example, propane or heating oil (which are two things that we pay for)—do not go with the same company that you used the year before. Do not assume that they’re going to give you the best price for being a loyal customer. Call around to every single service provider that you can find.

So, this is for Internet, electricity, heating oil—I don’t know, whatever you need at your house that’s essentially a utility. Call, compare prices. And then, ask if there is a pay in full discount because you would be shocked at how many people do not pay in full at the time of delivery for a service.

If you go on a monthly payment plan for something, it’s highly likely you are going to either pay interest or pay a higher price. And a lot of people don’t realize this because many companies do not advertise that fact.

And so, we needed to get propane and heating oil delivered to our home. And so I called every company I could find that would deliver to us. I compared all of their prices, I figured out their pay-in-full discounts. And I actually went with two different companies for the propane and the oil, neither of which we’d ever used before.

And so, it takes a little bit of legwork. But it saved us, I don’t know, a thousand bucks or something. So be really cognizant of things that we assume need to be on autopilot or need to always be the same and figure out if there’s something cheaper in your marketplace. Oftentimes, it’s real money that you’re going to save by doing that.

Mad Fientist: Yeah, that’s impressive. So, I will share mine even though it’s super embarrassing. So, I am currently talking to you while wearing a onesie.

Liz: What?!

Mad Fientist: Yeah. If you could see me now—that’s why we’re not doing us in video. I don’t want you to see me now. But it has changed my winter Scottish life.

My wife, Jill, got a onesie for Christmas last year from her parents. It was just like I guess a joke gift or something. But she wears it constantly. And I would, of course, always make fun of her because she looks ridiculous in it. But I started noticing like I would be freezing all the time.

The way it works in our house is I never turn the heat on. And then, when it gets cold enough, Jill’s cold, she turns it on. And then, I feel like, “Okay… well, I’ll enjoy the heat since Jill wants it.”

So, I thought for months that she was just doing it to spite me like. She’s got to be freezing. She’s just not turning it on because she knows I won’t turn it on myself.

Liz: She would not do that! Jill is the nicest person in the world, I have to tell your listeners.

Mad Fientist: She is! And she wouldn’t do that. It was me thinking that. And I’m like freezing. And every now and then, I would be like, “Are you not cold?” and she’s like, “No, I’m fine. This onesie is really warm.”

Liz: So, my brother came over to stay with us. He’s using his savings to just come and live in Scotland for a few months with us. So he obviously is not used to Scottish winters and Scottish houses with their terrible single pane windows and all that. So my wife was kind enough to buy us both onesies and surprised us one day. And it has changed everything!

I was like, “You know, a onesie is great. But then your hands and feet are still cold and your nose is still cold” and all that sort of stuff. But no, your core is so warm that your blood is able to then go to all your extremities again.

And we’ve probably saved 10x what the onesies cost in heating just since we got them. And that was like a month and a half ago.

So, for anyone out there who doesn’t mind looking ridiculous and doesn’t want to heat a whole house—Mrs. 1500 from 1500 Days, I saw that they were spatting about the thermostat again on Twitter, get yourself a onesie and you’ll never have an argument again.

Liz: Can you expand on this? Like what is the material of the onesies?

Mad Fientist: It is the cheapest fleecy material ever. I’ve already ripped the crotch out of it. So it’s not very robust in construction. But it is, yeah, the softest fleecy blanket you’ve ever you. And every time you use it, you’re like, “Oh, I love this material so much.” It’s that. But it’s your whole body.

And then, it’s got a hood. It’s got pockets. It just traps heat even though, like I said, I already have a crotch ripped out of it. It still maintains all the heat. So it’s fantastic. So, you will look like an idiot, but it’s worth it for the heating savings.

Liz: Does it have the footies in it, the little feet?

Mad Fientist: No, I don’t. No, it doesn’t. But I don’t even think I could handle that. I think that would be way too warm. It’s so super warm.

Liz: Wow!

Mad Fientist: Like I said, my toes are always warm and my fingers are always warm. And it’s because my core so warm that my blood is just doing its thing.

Liz: Okay, you have to send me a link to this. I need to see this…

Mad Fientist: Okay, I will link to it on the show notes.

Liz: Not on you. I don’t want to see it on you. Send me a link to where to buy it.

Mad Fientist: Yeah, I’ll put a link in the show notes, send you a link. And my wife took a picture of my brother and I wearing them. And having someone else there makes it look slightly cooler, so maybe I’ll put that in the show notes as well.

Liz: Oh, I would like to see that, alright.

Mad Fientist: Alright! So, second question. In the first interview, Nate said that one of the things he wants to do when he’s financially independent is to bounce radio waves off the moon. And that sounded like the sweetest thing ever. So has he done it yet? And if not, why not?

Liz: To be honest with you, I don’t know. We allow each other a lot of independent time to do our own stuff. So I got to tell you, he might have done it. I don’t know. He like goes out, goes to the barn. I don’t know what he does out there. So, it’s possible. I don’t think so. But he’s advancing in his kind of things that he wants to be doing around the homestead. And he does have a weather station that he installed, which I think that’s kind of like a space type of thing.

Mad Fientist: Okay. Well, I’ll follow up with him the next time I see him.

Liz: You need to ask him about that directly.

Mad Fientist: Alright! Third question. Frugalwoodstock, why hasn’t it happen yet? And when is it going to happen?

Liz: Because you have not organized it. You and Mr. 1500 need to organize it.

Mad Fientist: Alright, I’ll get on to Carl because I think that was his baby. I will leave that up to him. And he will definitely organize it to a much more fun event that I couldn’t probably even imagine.

Liz: Yeah! You know, it’s a wonderful idea. I love it! I am also kind of having another baby and being a little busier right now. But I would not rule it out for the future. I think it would be a lot of fun.

We’ve actually had a lot of friends come visit us. You and Jill came, the 1500’s have come, JL Collins has come to visit us, some other FI people (who now, can’t remember who all has come). But we’ve been really fortunate to have a bunch of visitors. I love having people come. It would be wonderful to have everyone come at the same time. It’s just the logistics elude me right now.

Mad Fientist: Cool! I’ll get on to Carl about that. He can start organizing.

Liz: Yeah, it’s all Carl’s fault.

Mad Fientist: So, I want to bring back a phrase I used in the first interview, which I’m super embarrassed about listening back to it. At the end of the interview, I said, “I don’t want a baby to start popping out,” so I’ll wrap this up—which we didn’t know each other back then. So it’s even more embarrassing. But now, we’re friends, so I’m going to say it again since we’re in the same situation. I don’t want the baby to start popping out. I’ve just got two more questions for you.

Liz: She’s not due for another two months. So hopefully, we’re okay.

Mad Fientist: Well, like I said before, I don’t know how this all works.

Liz: The last time, I think I was due the next day or something.

Mad Fientist: That’s true.

Liz: We’ve got some time this time.

Mad Fientist: So, I couldn’t let you get through this without you talking about the FinCon incident that keeps reliving itself every year we get a FinCon. So please, please, tell the dark side of frugality. Share that with the audience.

Liz: Alright! This is not the dark side of frugality. This is called strategic efficiency, alright?

So, if you go to, for example, a conference or some other event where there is free food at certain times, and then there is not food for other meals, during the time when there is free food, if you can take an extra sandwich or what-have-you, take it, and then you can eat it later in the day.

And this is the philosophy that we have followed in a lot of our travels. A lot of times, when we travel—we used to travel abroad every year. We use hotel points. And we had status with Starwood for a long time. And so breakfast is included when you have status. You get to go to the club, and you have an included breakfast.

Obviously, your lunch is not included. So when you go to breakfast, get some pieces of toast, make a little sandwich, take it with you, and have it for lunch. I think this is strategic. Brandon thinks that this is tacky.

Mad Fientist: No, no, no. I would share the dark side. This is very dark side. And it’s very personal to me.

So, if you are at a conference, and you tend to stay up later, and Mr. 1500 makes you drink—one too many beers than you actually wanted—and you wake up a bit late, and then you come to breakfast with your lovely wife who’s hungry and she’s travelled from Scotland to be there, you realize there’s no more food left. And then, you’re sad. So then you sit through these sessions very hungry and sad.

And then, you come to lunch, and you see Mrs. Frugalwoods bring out this amazing spread of what could have been my breakfast and eat that in front of you and enjoy it twice, that is definitely the dark side of frugality.

Liz: Okay, I shared it with people. And I would say that the dark side, this is just a lesson on waking up early, folks. I’ve written about this on the blog. You need to wake up early.

Mad Fientist: Yeah, that’s fair enough. Okay, alright.

Liz: I am sorry about that. I did feel bad about that. I’m sorry. I didn’t know they were going to run out of food.

Mad Fientist: Well, they didn’t expect everyone to be taking three meals for the next week of their lives. They didn’t factor that into their calculations.

Liz: I would also point out, this was like two or three years ago, and you’re still not over it.

Mad Fientist: Well, I think I have a picture from the hotel lounge where you’re sitting at this year. And it was a very similar scene. So I will also include that picture in the show notes. Luckily, I was there with you, so I did get to eat.

Liz: I was going to say, you were eating right alongside me.

Mad Fientist: There’s some poor soul that came in 10 minutes later and had nothing.

Liz: Oh no, that’s not true.

Mad Fientist: So, I always end all my interviews asking one piece of advice for someone on the journey to FI, what would it be. And since you’ve answered this before and probably didn’t revisit it, I always like to do it because it’s interesting to see if that one piece of advice has changed.

So, what’s your one piece of advice for someone on the path to financial independence?

Liz: Know what you want your life to look like. Know what you want to do. So the money side, obviously, is going to facilitate that. But the money is not going to tell you what you want out of life.

Money is just an enabler. It’s not going to make you happy. It’s not going to bring you fulfillment. You need to know what your passion is and what your calling is, why are you doing this, why are you working towards financial independence, and what do you want to do once you’re there.

Mad Fientist: Great advice… and consistent. That is exactly what you said two years ago.

Liz: Oh, is it really? I thought it evolved.

Mad Fientist: No, no, that’s timeless advice. And I think that’s the most important thing. And that’s the thing that I got wrong in my journey, just focusing on the money. Had I focused on the actual life itself, one, I would have had a more enjoyable journey. And then, I would’ve had a better idea of what to do once I got to that goal anyway.

Liz: I think you’ve done a pretty good job. I think you can say you’ve successful managed that and achieved that.

Mad Fientist: Well, thank you. I’m learning every day. But yeah, I’m trying my best I guess.

Liz, thank you so much for doing this again. It’s always a pleasure to chat with you. And I’m super excited for your book to be released. Congratulations again on that! It’s Meet the Frugalwoods. And by the time I release this, it will be out and people can buy it. I’ll put a link in the show notes.

Anything else you want to say before we wrap up or anywhere else people should go to see you? Obviously,

Liz: I think you can find me pretty much anywhere on the Internet, @frugalwoods. So I’m on Instagram, Facebook, Twitter. The blog is Frugalwoods. And the book is Frugalwoods. So, we try to be as consistent, make it as easy as possible.

So, feel free to be in touch with me. And thank you so much for having me.

Mad Fientist: Awesome! Alright, I look forward to seeing you again. Good luck with baby #2. And enjoy all the nice snow that I’m sadly missing. And yeah, I look forward to speaking to you soon.

Liz: Sounds good!

Mad Fientist: Alright, bye.

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My Brother – Using the Power of Money to Pursue Your Passion Thu, 08 Feb 2018 10:18:57 +0000 Join me for an interview with my little brother that we recorded live in Venice!  We talk about growing up, extreme frugality, and how you don't need to wait until FI to use the power money gives you to pursue your passions.

The post My Brother – Using the Power of Money to Pursue Your Passion appeared first on Mad Fientist.

On today’s episode of the Financial Independence Podcast, I interview my little brother while drinking wine next to a canal in Venice!

Financial Independence Podcast Live in Venice

Brian, who is three years younger than me, isn’t actively pursuing financial independence but he’s done some really impressive things with his money and has used the power that money provides to fully pursue his passions.

Blue Coupe Performance

Brian Playing Cowbell with Members of Blue Öyster Cult

In fact, he’s currently in the middle of a ~6-month mini-retirement and is using the time off to travel and hopefully take his music career to the next level.

We dive into a lot of interesting financial topics but we also degenerate into some brotherly chat, which produced classic quotes like this one: “I took my solids elsewhere.”

Brian's Apartment

Brian’s “Apartment”

Hope you enjoy it!

And if you want to ask Brian anything (or if you have any connections in the traveling-musical-theater industry), please add a comment below!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • How we are different when it comes to money (including his much more extreme level of frugality)
  • Why he chose to live in a place with no heat, hot water, air conditioning, sink, or toilet
  • How to save money as a musician/artist
  • Why focusing on buying more gear misses the point and how you can avoid that common trap
  • How to utilize the power of quitting even if you aren’t financially independent
  • What it’s like tasting the early retirement lifestyle
  • Why learning a language abroad is a great way to travel
  • The pros and cons of having a day job when you’re an artist
  • How to get a dream job in the arts
  • Using mini-retirements and part-time work to pursue your passion

Show Links

Full Transcript

Mad Fientist: Hey! Welcome everyone to the Financial Independence Podcast, the podcast where I dissect the brains of some of the best and brightest in personal finance to find out how they achieved financial independence. I’m your host, the Mad Fientist. And welcome to my laboratory.

Wow! It’s like you’re really here with me. You may notice some additional sound effects today. And that’s all thanks to today’s guest, which is my little brother, Brian. He was the mastermind behind my original podcast interim music which is what you heard at the beginning of this episode. And I asked him to create some music that I could talk over when I’m doing intros just like this one. I was getting sick of just hearing my boring voice all the time. So now you can hear some sweet sounds underneath it, which I think is a lot better.

Anyway, as I mentioned, I have my brother on the show today. And he’s three years younger. And although he’s not actively pursuing financial independence, he’s done some really interesting things with money that I think people on the path of FI could learn a lot from. Not only that, he’s actually a lot more frugal than I am. And he’s really quite extreme with his frugality, which you’ll soon hear about.

So, without further delay, this is an interview with my little brother, Brian, that we recorded next to a canal in Venice, Italy actually.

Hope you enjoy it.

Mad Fientist: Hey, brother!

Brian: Hello!

Mad Fientist: So, before we start, let’s set the scene a little bit. We are sitting here on a canal in Venice. We’ve been here for a couple days, eating a lot. And this is our last day in Venice before we move on to more internal sections of Italy. And I figured what better place than canal-side with a bottle of wine to interview my brother. So, thanks a lot for being here.

Brian: Yeah! Si, si. Grazi.

Mad Fientist: So, my brother has been learning Italian and doing his best.

So, before we start, I also want to thank you for creating the podcast interim music. I don’t think anybody knows who actually made that. But you are the mastermind behind that.

Brian: Yeah! No, I appreciate the opportunity. Actually, it’s been my best known work as of yet. So thank you for letting people hear that.

Mad Fientist: Yeah, it’s been downloaded and listened to over two million times. I haven’t checked for a long time, so it’s probably like 2.5 million. But yeah, it’s been a lot of plays of that music.

Brian: That’s crazy!

Mad Fientist: Yeah! And it’s perfect. I asked you to create/recreate Thomas Dolby’s She Blinded Me With Science, but do it differently enough so I don’t get sued. And then, obviously, replace science with fience. And it’s way dorkier than I ever imagined it would be.

Brian: Thanks! Yeah, it makes no sense musically. I’m glad it worked out.

Mad Fientist: So, I’ve wanted to get you on the show for a long time. You’re not as obsessed with money as I have been my entire life. But you’re good with money. And you do have an interesting story to tell as far as how money has allowed you to be a professional musician. So, how would you say we differ when it comes to money?

Brian: Well, when you asked me to do the podcast a long time ago, I thought it was as an example of what not to do in life. But no, from just watching what you’ve done, it’s taught me how to be better with money.

How would we differ with money? I don’t think about it, to be honest. I typically don’t think about it—or at least, probably five to ten years ago, I didn’t think about it at all. And then, when I got a better job where I was making more money, then I started seeing what’s important and stuff like that through what you’ve been doing with the Mad Fientist.

Mad Fientist: Well, I disagree a little bit. Let’s go back to when you moved into your apartment in Pittsburgh. Obviously, you knew enough about money and prioritization to find a place where you could play drums—which is what you love to do. You’ve been playing drums since, what, you’re 10 years old or something—and you needed a place to be able to do that in the city, and you didn’t want to have to travel out to the suburbs or anything, but you also knew that prices in the city are expensive. So can you just describe what you moved into it when you moved into your last apartment in Pittsburgh?

Brian: Yes. As a drummer, I think it’s impossible to find an apartment where you can practice and afford in a city. Luckily, the rehearsal space I was using with one of my bands was in this beautiful building downtown. And the owner was very relaxed.

I asked him if I could live there. And he said, “Just don’t tell me what you do. You can live here. Just don’t tell me what you’re doing.” So I moved into this empty storage room basically. It was big, but no amenities whatsoever. No utilities really. There was one wall that had outlets all in a matter of two square feet, I would say. Those were all my outlets. There were three outlets. And then, no heat, no water inside of the room. No shower. But I could practice drums, and it was $350 a month including no utilities.

So, it ended up being my dream place. I mean, I think to me being able to practice and play in my house was more important than having an outlet on every wall, so that I could have a nice lamp everywhere, whatever.

Mad Fientist: So, let me just reiterate this. So there was no toilet in the apartment. There was no sink in the apartment? Or did you have the sink at the time?

Brian: No sink. There was a sink right outside my apartment, but no hot water.

Mad Fientist: And there was a toilet three floors down. So this is an abandoned building pretty much in Pittsburgh that has offices in it. So, some people would come in during the day. But pretty much, it was just you in that building.

Brian: Yeah, for nights and weekends, it was basically my building which was amazing. I mean practicing drums, everybody in the building could hear you. But luckily, during the day, I was at work when people were in the building. And then when people would leave the building, I would come home, practice, try and find water.

So, it wasn’t that bad. There was a shower on the second floor where my rehearsal space was for the band. I was up on the seventh floor. But the owner who allowed me to stay there quickly sold the building, probably within a year. A new owner came in and demolished my shower. So that’s when I moved to the buckets.

Mad Fientist: So, yeah, he had an incredible amount of buckets. There is buckets for showering in. There is buckets for going to the bathroom in?

Brian: Well, yeah. I mean, the bathroom bucket came later when I realized it was nicer to just—you know. It was only for code yellow. There were no solids. I took my solids elsewhere. But yeah… I had a bucket for my dishes. I had a bucket for my laundry that I would churn my laundry in, and then a bucket I’d shower in. And I had a camping shower basically. I go harvest the water on the fifth floor where there was a hot water tank, and then bring it up to my apartment and tie it to the ceiling, get in the bucket.

Now, I didn’t have heat either. So in the winters, it was awful. And it was a three-gallon bag that would run out very quickly, so you’d have to stop it while you lather. And that’s when you’d freeze. And then you’d let the water run on you.

Yeah, it was miserable. But I could afford it, I could save money. With that apartment, I could save money. And I could practice, which was the biggest thing. I practiced every day so much because of that place. So I’m really thankful for it.

Mad Fientist: Yeah. And you had drum sets up there. You had a marimba. You had pianos. You had congos. You had Indian drums, tabla. You had loads of instrument sin there. There’s no way that would have fit in some normal Pittsburgh apartment.

So, I also want to say like it sounds really bad, but it was actually a lot nicer than I expected. When you said that you were moving to somewhere like that, I was actually really worried about you. It sounded awful. But when I came, it was actually pretty cool. You’d have to get into a freight elevator to get up there, which was a cool Brooklyn loft space thing. It was actually really cool. And the space was really nice and bright.

And then, it kept getting better over the years, right?

Brian: Yeah, yeah. So, when I first moved in there, I brought an ex-girlfriend with me. And she started crying when she saw it. And she just kept saying, “What is your mom going to think?” because there was nothing but filing cabinets in the space, in the area. They took the filing cabinets out of course.

And then, he new owner—I thought I was going to be evicted pretty soon because it wasn’t necessarily legal to live there because it wasn’t residential. But the owner just kept it quiet. And he gave me more outlets. He eventually put electricity in. And then, about two years ago, I got heat and air conditioning. It just blew my mind.

And then, the best part was about a year ago, he put in a toilet, a functioning toilet, and a hot water tank in my room. I cried, and I asked the plumber while he was installing if anybody ever said you’re a miracle worker. He said no. He said no. But it was the best experience ever.

Mad Fientist: So, explain how you took a shower.

Brian: Eventually, when I got the running water, I had a hose that ran from the spigot—that’s what we called it in Pittsburgh, the faucet—to a shower head that I made out of a PVC pipe that my dad made for me.

Mad Fientist: Yeah, my dad made a big shower enclosure out of PVC pipe. That was actually pretty impressive.

Brian: Yeah! It was amazing. It was the best shower. And then, a bucket inside of that. I would stand in the bucket, shower curtains all around me, flip the nozzle on the faucet, that would redirect the water to the shower nozzle, the shower head. I would stand in the bucket.

And then, I had a foot pump in the bucket with me that I would step on while I’m showering. And that had a hose that would lead to a bucket outside of my bucket. That would put the water in there. So, I had two buckets waiting for the water. So I’d have to switch the hose mid-shower because the one bucket would fill up. And then I would use that water to flush my toilet.

The same with the laundry. Laundry, I had a bucket. It was basically a salad spinner. I would put my wash in there which was basically three boxers—three pairs of boxers max is what I could do or one pair of pants. And then, I would churn that. I would get exhausted. But it was like living a pretend life. And that was what was so much fun about it. It didn’t feel real every time I do it. It just made me happy because it was like it was a way to do something that’s so easy for most people, but then you really appreciate it when you think about what you’re actually doing, like taking a shower and seeing where the water goes and having to do something with it. It was really fun. And I’m going to miss that a lot.

Mad Fientist: So, how long were you actually in that apartment for?

Brian: I was there for seven years—seven years, yeah.

Mad Fientist: Seven years. And you’re 32 now. Someone in their mid-20’s, I don’t know how many people would make that decision. So why did you not think, “Why don’t I just go into a bunch of debt and have this really nice, fancy place in the city and have and bunch of space?” Why did that never cross your mind?

Brian: I don’t know. I don’t know if it’s the way we grew up. We weren’t really given like a credit card at a young age or anything like that. I don’t know why I didn’t think debt was an option for some reason. I thought live within my means and hope it gets better. And yeah, it pretty much did.

I mean, if I had gone into a lot of debt then, I don’t think I would be sitting in Italy right now.

Mad Fientist: Yeah. And that’s a really interesting story too. And we’re definitely going to come to that because what you’re doing now is amazing and not many people could do that at your age which is a testament to how you’ve been able to save and your choices with money.

So, you’re living in a place where you can practice all the time to any hours of the night that you wanted to, put in a lot of work to get better at all the percussion things that you’re doing. And you’re working at the time. So can you just describe a bit what you’re doing?

Brian: So back then I was working at a flower shop when I first moved in there. So, I wasn’t making much at all. And there was no really working up in that company. Then I wasn’t really saving any money, but I was living way more comfortably in a place that I loved and was able to practice. So I knew I could get better and go towards something I wanted.

But then I got a new job that paid more money. And now, because I maintain the same quality of life from when I was working at the flower shop, I was able to start putting money away for whatever. I didn’t know what I needed. As a musician, you just want more gear. So I was probably saving for a new drum or a new drum set or something like that. But really, I didn’t know what. So I was just saving which was nice.

Mad Fientist: So, saving for new gear. That’s maybe something we should touch on because I think a lot of people in the creative fields are always looking for that next thing. I know me personally, it was like, “Well, what’s the next synthesizer I could buy. That would be really sweet. It’ll make me even better at what I’m doing. I’m sure it’s the same with a lot of different arts.”

So, how did you overcome that urge?

Brian: Well, luckily, I think it was that the job that allowed me to make a little more money to save was also a job in the instrument selling arena. So I was mainly dealing with customer service aspects of selling drum parts for custom drum builders and stuff like that and just people, general instruments for musicians and stuff.

And so seeing the amount of people that were obsessed with the wrong thing, seeing people call and complain that the drum sticks were an ounce off or something crazy and complaining about that, it made me realize these people are not focused on the right thing. They’re focused on these elements that have nothing to do with music or getting better. And that made me not want to spend money on gear and kind of save my money for more experiences, or if I needed to take off work for a musical job, I would have that safety where I could leave my work and maybe not that well-paid gig.

Mad Fientist: Yeah, I definitely want to talk about that because you’ve utilized the power that money in your savings gives you, and you’ve utilized it quite a few times in your career which has been really good to see.

And I know we talked about it before you made that first demand at your work. So can you talk a little bit about what you did when you were thinking about going down to Hilton Head to play some Broadway-type shows.

Brian: Yeah. So, I got an offer. I worked back in the end of high school/early college with a producer who did Broadway tours and stuff like that. So I did a run with him. And he was living Hilton head. And he said, “We’re doing a production. We need a drummer. Can you come down for two weeks?”

Now, I didn’t have two weeks worth of vacation time. And I was really torn because it’s a dream of mine to play musicals and travel. So that was my in there. And I called you I think and said, “What should I do?” And you said, “When you’re a good employee, you have all the power because it’s hard to find good employees. Just tell your bosses you need two weeks off. And don’t worry about it!”

I had the savings already. So if they said no, and I still wanted to do it, I would be fine. So I went in to work and said, “Yeah, I have an opportunity, I’d really appreciate some time-off for it.” And they let me.

And then, I went down, came back. And while I was down there, I got another opportunity to come back two months later to play for a month-long show.

Now, my bosses did not like that. So when I got back, I said, “Okay, I’m doing it again.” And they said no. And I said, “Okay, I’m still going.” And then, they said, “Okay, you can come back and you can work remotely.” So, it worked out great.

Mad Fientist: I know! That was great. I actually visited you. And you were put up in this amazing beach house with a bunch of other really cool and interesting people. And you’re living on a beach for a month for free and playing, what, a couple of shows a night or something?

Brian: Yeah, yeah. We’re doing at least a show a day; two shows on one of the days.

Mad Fientist: And you’re working remotely, so you’re still getting paid.

Brian: …“working” in quotes. You can’t see the…

Mad Fientist: Yeah, I taught him that that was the key thing when you’re working remotely. Every time you say “working,” you have to do air quotes.

And yes, so had you not had any savings, that would have never been possible because they said no right off the bat?

Brian: Yeah. As soon as they had said no, I would’ve had to say, “Okay, I won’t do that. I will stay here. I’m yours” because I wouldn’t have had an option.

Mad Fientist: And since your expenses were low (since you obviously worked your way into a very low cost of living situation), you had five figures saved up. And that could have lasted you for a long time.

Brian: Yeah, yeah. I’m trying to think. I didn’t have a car payment. When I needed a car, I bought it with cash that I had saved up. So, that was the most important thing about buying a car for me, was not going into debt for that.

I don’t see any reason to want to go into debt. There’s nothing that I want bad enough to be in debt for. So yeah, not having debt and having a low cost of living made all that possible, all that traveling possible.

Mad Fientist: And now here we are in Venice on a small little waterway in Venice. It’s beautiful. I’ll put some pictures in the shownotes. And you haven’t had a job for how long now? Four months.

Brian: Four months it’s been since I’ve had a job. So yeah, I’m tasting the retirement life. I’m not there. I haven’t reached FI. But I’m tasting it, and it tastes delicious.

Mad Fientist: So yes, let’s discuss that decision and how all of this came about.

Brian: So, again, that’s from having the savings, the low cost of living and no debt. It came from me not necessarily being happy at where I was working. Unfortunately, because of the legal reasons with my living situation, the owner of my building started getting worried that there would be people asking questions and stuff about me living there. So, he asked if I could move out, at which I was fine with. We’re still good friends and stuff. There was no hard feelings. But it was the saddest thing for me because I lived there, struggled there for seven years. I loved it so much.

So, moving to just a regular house or trying to find another apartment was just not what I wanted to do. And then, you and Jill offered to have me come out and stay in Scotland for a little bit. And here I am, I still haven’t left. I don’t know how you guys are feeling about it. But I’ve saved up money to try and buy a house.

And then, I realized there’s no reason for me to buy a house right now. There’s nothing holding me there. And I want to travel. And I had the savings. So, I was able to leave my job and live off my savings for a good amount of time I think.

Mad Fientist: Oh, yeah, yeah. You’ve been living on it for a while, and you hardly made a dent, which must feel pretty good.

Brian: Yeah, it feels great. I mean, it’s a lot to you and Jill for letting me stay with you guys.

Mad Fientist: No, it’s fun for us. We’re super excited to have you. And yeah, it’s nice having some company in early retirement when everybody else is at work, when Jill’s working and all our friends are working.

Brian: So, we get together at the gym, […] Yeah, that’s another thing, when we were talking about appreciating things that you brought up, was how much you appreciate relaxing after you do something like going to the gym and like how nice this is, how much like sitting out and having a glass of wine after doing some work and stuff. So…

Mad Fientist: Speaking of Jill, she’s sitting here taking pictures. And she’s shaking her head now. But how has it been living with your brother-in-law for the last four months.

Jill: It has been wonderful! It’s made me appreciate him a lot more. And he can stay as long as he wants.

Brian: Thanks, Jill.

Mad Fientist: No, it’s been great.

So, we’ve actually done a lot of cool stuff. We’ve gone to Portugal. We’ve gone to London. And now we’re in Italy.

Yeah, let’s talk about Italy. So you’ve been learning Italian over the last few years. And you just spent, what, 2 ½ weeks at an intensive language program.

Brian: Si, si. Yes, that means yes. I have been. I’ve always wanted to learn Italian. Since probably 10 years ago, I wanted to learn Italian. So I figured I have this time. I’m already in Scotland. It’s £20 to fly to Italy. And then, doing the two-week course is just something I would want to invest my money. That was worth investing my money in.

Mad Fientist: Yeah! And then, I got to come over and meet all your language-learning friends. It was really cool. It is amazing how integrated into that society you seem to get in just two weeks.

And I know you’ve said to me personally that that’s a great way to travel. Can you just talk a little bit more about that?

Brian: Yeah! I can’t really say I learned a lot of Italian. I’m pretty awful still. It’s a lot harder than I thought. Duolingo was telling me I was 43% fluent, and there’s no way I’m 43% fluent.

Mad Fientist: This is a good story actually. When Brian was living with us over in Scotland, I would be doing something on my computer in the morning, and he’d be doing his Italian. And then, he’d say over to me, “Oh, 43% fluent!” And I’d laugh and make a joke and say something like, “Yeah, right.” And I thought he was laughing with me, but he actually wasn’t. He thought he was 43% fluent. So, in his mind, he’s just going to come over here in two weeks. And two weeks…

Brian: Just tough it off.

Mad Fientist: Tough it off in two weeks and be 100% fluent. But that isn’t how it exactly works out.

Brian: No, I’m off. I’m even worse than when I came here for some reason because it’s killed my confidence completely. I just panic every time I walk into a restaurant.

Actually, the first night I was here in Italy by myself, I walked out of a restaurant because the lady looked too Italian for me to handle. She wouldn’t have any patience for my awful Italian.

But yeah, traveling, the experience of traveling like this has been amazing. It normally takes a long time to kind of make friends. I have been in Pittsburgh for so many years. And the only way I’ve made friends is through joining bands and stuff. And that’s years of playing with different people. Going to Italy, within the first two nights of being here, I was living with a person, my host family, which was just a guy in his 30’s, a musician as well. We became friends really quickly. And then he took me out with his friends. And it was just a group of us that got along.

So, even more important than learning the Italian, I think, was making the connections and having interactions and just having a great experience like that.

Mad Fientist: I know you met some people. And you may be like one guy needs a drummer in Paris, and you may go and explore that; and there’s another guy in London. Yeah, it seems like you’ve met a lot of good contacts.

Brian: Yeah, it’s great. It’s great having an open life almost. I’m open-ended. I can go anywhere right now.

Mad Fientist: So, you’ve had about four months of this early retirement lifestyle. Is there anything you’ve noticed or taken away from it being an observer of the lifestyle I’m living or just feeling that level of freedom? Are there any thoughts there?

Brian: For me, recently, it’s hard to leave the vacation mindset of it because I immediately left my home and went to another country. So automatically, right there, it feels like a vacation. It doesn’t feel like I’ve just quit my job. I’m still maintaining my life. Everything changed as soon as I quit my job.

So, it’s hard to get out of the vacation mindset and actually get serious about that I need to find my next step in life. So that’s been hard. Your life is so open after you leave work, it seems like it’s overwhelming to organize. I think you really have to work on organization, personal organization. I’m not very good at that. I always told you I would just have meltdowns when we had scheduled shows for the bands I’m in because I’d never write anything down because I didn’t want to believe that I had to go do it for some reason. I don’t know why. It always stressed me out.

So, getting organized is a hard thing for me. So I am going to have to work on that.

Mad Fientist: So, how do you think you differ from your musician friends as far as how you’ve handled your finances? I’m sure you probably don’t talk about that stuff with them, but have you got a feel for how other musicians handle life and maybe not earning a steady paycheck?

Brian: I think out of my musician friends, most of them are trained in classical or jazz background, and then mostly play rock around town and stuff like that. Those guys struggle. I mean I think a lot of them are kind of in the gear mindset as well. Even though they’re great musicians, they still want the next thing. They tend to spend money on that.

It’s unfair for me to say I was just a musician at the time because I did have that job where I was—

Mad Fientist: Do a lot of your musician friends not have a day job?

Brian: A lot of them don’t. A lot of them teach. So they would teach. I would go to my nine to five job and work on customer service. And I know they’re more paycheck to paycheck. There’s not much of a savings. And they also tend to be more oriented towards getting new gear as well which doesn’t seem to make sense.

That’s the funny thing. When I have less money, I would search more for new gear and want that more when I didn’t have money. And then, when I had a little bit of a savings account, I didn’t want to spend it on gear and stuff like that.

So, I think that’s maybe their mindset. I can’t really speak for them. But I know they teach, and it’s more paycheck to paycheck for them.

Mad Fientist: So, what are your thoughts on a day job? Obviously, it’s allowed you to do this. And who knows where this will lead, potentially lots of opportunities and maybe something completely life0changing that you decide to do after this just based on the contacts and the things that you’re doing now. So, do you think the day job, you’re happy? You want the day or you’re out?

Brian: I’m happy I saved while I had a day job. I think that’s why I left it, because I kind of do miss the struggle in a way because it makes you more creative on how to live. When I was struggling, I found this apartment with no shower. And that led to such great things.

But now, I could go into debt or spend all my savings on a really nice apartment and struggle to find a job to maintain that lifestyle, I would prefer to not go back to a day job and maybe have to be more creative with how I spend my money and how I make money. But yeah, I would prefer not to go back to a day job.

Mad Fientist: Yeah… we can transition to what you’re thinking about in the future, but we haven’t really even talked about what you’ve done in the past. So you’re a classically trained percussionist who played operas in Italy. You’ve done musical theater down in Hilton Head. You’ve toured America with rock bands like Love Drug. You’ve played congas with Rusted Root.

Brian: Yeah, I think the ultimate experience was the cowbell. I did get to play cowbell with two of the original members of Blue Oyster Cult on Don’t Fear the Reaper.

Mad Fientist: So, for the people who have seen the Will Ferrell sketch of him playing cowbell in the studio with Christopher Walken on Saturday Night Live, that was my brother.

Brian: Yeah, I was slightly inebriated during that. I was hired to play keyboards on another song with the band, Blue Coop. It’s a bass player from Alice Cooper and then two of the members from Blue Oyster Cult. And so, I was playing keys with them on one song. I went up to the drummer and I asked, “Could I play cowbell on Don’t Fear the Reaper?” and he’s like, “We would love to have you, but we don’t have an extra cowbell.” And I was like, “Don’t worry! I got mine in the car. I ran out and got it.” And I don’t know if they wanted it, but I played the entire song over top—even when I wasn’t supposed to.

Mad Fientist: Yeah. Sadly, we still haven’t tracked down the video of that. But I have a picture of you—it was a very bad picture, but I can see you very sweaty and really intensely smacking the shit out of a cowbell.

Brian: Yeah, yeah. It was one of the best experiences of my life, I’d say.

Mad Fientist: So, you’ve done all these various things with music. Where do you go from here? What’s your ideal future looking like in the next six months or year?

Brian: I think it’s exactly what I’ve experienced so far, mixing the two, using music to live the retired life of travel. That’s what I experienced with doing the musical theater stuff in Hilton Head. At night, every day, it was like vacation. But then you’d go for two hours and play a show, which I loved playing. So that was the work. That was what paid me. And then, you were just living a life of retirement basically.

So, I think combining those two things would be my ultimate dream—travel, playing music. I feel most confident and most alive if I’m in a new place, and I’m there with the purpose of playing music. So if there’s any way I can do that—which I know there is, I know people that do that. I don’t know how to get into that right now. That’s what I’m trying to figure out while I have this free time.

Mad Fientist: What you came up with was a really good idea. Well, one, we have some friends in London who are in the Weston Theatre in a musical capacity who we’re going to chat to about it. But you also had a really good idea of taking lessons with people in the job that you want.

Brian: Yeah, exactly. So, at this point in life, after school, after studying, it’s all about who you know pretty much. So moving to a city where there’s things that you want to do, you have to get involved in that community in that city.

So, for example, moving or going to London and taking some lessons with somebody who’s in the theater industry, that’s the perfect way to get into that industry.

Mad Fientist: …because you said, they get a lot of requests to play. And obviously, they can’t do everything. So when they can’t do everything, they think, “Oh, who could do this? Oh, yeah, Brian, my student, because he’s amazing. And I know he’s amazing because I’ve taught him.”

Brian: Yeah! I mean a lot of the times back when I was in middle school and high school when I was taking lessons from the big guy in Charlotte, he would say that. He would say—not based off of my playing. He would say I’m easy to work with. That’s very important I think, being easy to work with. I would get a job because of that, because I show up on time, and I’m easy to work with.

Now, I would like to get a job because I’m good at playing too. But…

Mad Fientist: That’s something I’ve learned as well just in my career as a software developer. A lot of people can do the job, but a lot of people are just really terrible to work with. Like I told you before, you’re in the top 1% of drummers anyway. The fact that you’re not an egomaniac, and you are easy to work with, is going to make it an easy choice for a lot of people.

So, yes, we have talked about all the amazing musical things you’ve done, but we forgot that you were the drummer of Junk Star way back in the 90s, right?

Brian: Yeah. Yeah, that’s where it all started actually—North Carolina, Junk Star, circa 1998.

Mad Fientist: I don’t even know. No, no, because I was in middle school, and you were in elementary school. So it was my eighth grade talent show.

Brian: Yeah, I was in elementary school. Holy crap, yeah!

Mad Fientist: So, Brian was in elementary school. And he was our drummer. He came up to middle school for the big talent show. And we played a Nirvana song, I think?

Brian: Yeah, Territorial Pissings. We had to change the name because they wouldn’t let us play.

Mad Fientist: That’s right. We weren’t allowed to say the name, but we played it. And yeah, everybody’s like, “Who’s this elementary school kid that came up here and destroyed it on the drum?” So yeah, I forgot to highlight that incredible achievement.

Brian: I had a drum solo. I just remember I had a drum solo. And then you came around while I was playing my drum solo and started petting the back of my head. It made me screw up while I was in it. I said, “What is happening?”

Mad Fientist: It’s all about the performance.

Brian: It is a performance element. People just ate it up, yeah.

Mad Fientist: We sadly didn’t win. I think we were quite loud.

Brian: We got the loudest. I think we won loudest.

Mad Fientist: We were loud. And I was singing which was a big mistake.

Brian: Puberty, you were going through puberty at the time.

Mad Fientist: Yeah, it was squeaky. It was high anyway. Had I been pre-puberty , I think it would’ve been alright. But it was either borderline or after. And there’s no way I could scream like Kurt Cobain. So…

Brian: No. No, you couldn’t.

Mad Fientist: So, you’re thinking touring as a musician. Now, is that musical theater? Is that more in the rock band sort of area? Do you have a preference?

Brian: I think I like the professionalism of the musical theater industry. I mean with musical theatre, if you get an international tour or national tour or something like that, you get benefits. You get a retirement fund. I never had that. That would be super exciting.

And I love the idea of playing the same show every night and trying to get better at that, and then being in a new city with a group of people that you’re traveling with. I like that.

Touring with a rock band, that would be great, but I think that would be more of a struggle and less organized, less professional—not that it’s not professional, but less professionally oriented where I wouldn’t have retirement, I wouldn’t have health insurance from the rock band tour.

So, I’m happy to do either of those as long as I can maintain my life.

Mad Fientist: So, you’re tapping into your savings. You really haven’t made too much of a dent, maybe 15% or something so far. And it’s been a good 4 ½ months of living off of it. And I know you said to me that you’re thinking about maybe going part time when you go back to the States. So maybe talk about what your immediate plans are.

Brian: Yeah, I do need to get back, start practicing again, and start figuring out the actual plan for how I’m going to make what I’ve discovered here—you know, being here and enjoying how you live, how you guys live, you and Jill. After discovering that, I want to figure out a plan to make that work. And I think that will involve part-time work, so that I don’t have to deplete that savings. I don’t want that gone. I like the safety net of having that.

Again, like you’ve taught me, you have power when you have that safety. So, I don’t want to get rid of that.

Mad Fientist: Yeah, power and choices, definitely. So, I know you’re not really pursuing financial independence or early retirement or anything like that. But you obviously are good at money to be able to do something like this when a lot of your peers probably, as you said, are paycheck to paycheck.

So, do you have any advice for someone on the path to financial independence or early retirement?

Brian: I mean for me personally, I think the hardest thing about living in America is you get taught that your happiness involves acquiring things. It’s hard to look past that. But not spending money on silly things like gear and stuff, and spending money on life experiences and then saving the rest to get to financial independence I think is super important.

Yeah, that’s what I learned from listening to the podcast and reading your blog and stuff like that. It’s helped me. I don’t think I would have saved without you doing Mad Fientist stuff.

Mad Fientist: Really?

Brian: Yeah, I don’t think. No, no. I would’ve gone into debt.

Mad Fientist: Oh, really?

Brian: Probably. I think I probably would’ve just not cared at all about money and just, yeah, fared that way…

I never grew up with it, but it’s just something you see everywhere. So I think it would’ve been hard for me—

I see friends like buying the brand new Mac. And they can’t afford it. It blows my mind. And it blows my mind I think because I’ve seen how you work with money and you deal with stuff.

Mad Fientist: So, yeah, that just reminded me, you have been pretty cold in our apartment sometimes.

Brian: Yeah. Well, Jill, thank God, bought us onesies that keep us warm because we don’t use the heat that much.

Mad Fientist: So, my life obviously to me feels really normal. I guess when Jill question things, that makes me question them a little bit. But still, it’s not like I have that much feedback. So, is there anything else in my life that’s really quite extreme or weird or bad?

Brian: No. Yeah, the heating is weird, but I think that’s a Scotland thing. It seems like everywhere in Scotland, the heating is not great. But people tend to keep it on more I think.

That’s a funny thing. Going to Scotland, I never heard so many people be like, “Should we turn the heat on? Should we turn the heat on?” everywhere we’re going. In America, it’s just like, “Oh, the heat’s running constantly. It’s got to maintain the 72° temperature in the house, Fahrenheit.” But no, it stays pretty cold. That would be the strangest thing I’m thinking.

Mad Fientist: But the onesies have changed everything.

Brian: It changed everything in my life, yeah, yeah…

Mad Fientist: …which I’ve talked about this with Mrs. Frugalwoods. And that episode is going to come out after this one. So stay tuned for that. But probably the best investment that Jill has ever made, she bought it—Brian and I didn’t believe it. And we’re always freezing, and she was always warm because her parents bought her a onesie. So, she bought us onesies as a surprise. And they’ve obviously paid for themselves with the amount of heat we’ve saved. But the amount of enjoyment is just priceless.

Brian: Yeah. I mean, they look great. I took the last band picture I did for Love Drug, I used the onesie as my costume. I wish I had that back when I had no heat in my apartment. I used space heaters for five years in my apartment. So, if I had that onesie, I could have freed up one of my three outlets for something else.

Mad Fientist: Well, it’s been great. I really appreciate it. We’ve gone through three glasses of wine since we’ve sat here. I have been stopping the recording every now and then to refill. And it is getting cold. It is January in Venice which has actually been a really nice day. It’s nice and sunny as you’ll see in the pictures in the shownotes. But it is a bit chilly. So we are going to sign off.

So, yeah, I appreciate you taking the time to sit here and chat with me. And I look forward to your new interim music. I’ve commissioned my brother to add a little bit of jazz to my intro because I’m tired of just talking and not having any background music. So in addition to the brilliant 3-second intro, we’re going to have a little synthesizer background music hopefully to accompany my intro for the guests. Hopefully, we’ll get that done for this episode—which yeah, maybe we will.

Brian: Yeah, I appreciate you letting me live with you and feeding me. I appreciate everything honestly. It’s been great.

Mad Fientist: No, it’s been great. We’ve loved having you. So yeah, thanks for doing this. And so long!

Brian: Ciao!

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Hierarchy of Financial Needs (and the Meaning of Life) Thu, 18 Jan 2018 18:25:36 +0000 There's a step above FI on the Hierarchy of Financial Needs and the sooner you start thinking about that next level, the more enjoyable and rewarding your journey will be!

The post Hierarchy of Financial Needs (and the Meaning of Life) appeared first on Mad Fientist.

When I was in Ecuador last year, Mr. Money Mustache came up to me and said he was pissed off.

Someone had been asking him questions about FI but when the discussion started getting into the numbers, the person said that they’d just save those questions for me.

MMM jokingly asked me if that means he’s lost his edge? Has writing about happiness and more philosophical topics resulted in him not being viewed as a financial mastermind anymore?

Obviously he was just messing around and wasn’t really angry/concerned but this topic actually came back up a few days later.

After I finished my presentation to the group, Mr. Money Mustache raised his hand and said, “Fientist, it seems you too are turning soft in your old age. Do you not care about money or numbers much these days either?”

Turns out, my presentation had nothing to do with numbers. No graphs. No math. Nothing even close.

I laughed and said, “Yes, it’s weird but I don’t think about numbers much at all now and I’m starting to realize that money is the least-interesting and least-important aspect of this whole journey.”

I’ve built my whole blogging career on numbers so it’s been an unexpected turn of events, to say the least!

After the presentation, I was chatting with some of the other attendees and was saying how I wondered why I stopped focusing on money as much. Thankfully, one of the attendees offered a perfect explanation for it – Maslow’s hierarchy.

Maslow’s Hierarchy

Maslow’s Hierarchy of Needs shows what motivates humans, the relative importance of each need, and the order in which the needs are generally fulfilled.

Maslaw's Hierarchy of Needs

At the bottom of the pyramid, the first human needs that have to be met are those necessary for human survival (e.g. water, food, etc.).

Once a person’s physiological needs are met, focus then turns to safety.

It’s obvious safety is less important if you don’t have fresh water to drink so you’d need to focus first on finding water before then getting somewhere safe from predators.

That doesn’t mean you’re not on the lookout for hiding places or shelter when you’re searching for water, it just means water is your first priority and the other things are less important.

So that’s a really brief summary of how Maslow’s hierarchy works.

I’d say a similar hierarchy exists for financial needs as well.

Here’s what I came up with:

Hierarchy of Financial Needs

At first, you need to pay for all the things that you need to survive. If you have to use debt to do that, it doesn’t matter because you need to buy food to stay alive so that’s what you do.

That is not sustainable though so eventually you’ll need to make enough money to pay all your expenses.

You could live quite happily at the Sustainability level for a while but you’re not necessarily safe there.

One small injury or unexpected expense could derail everything so ideally you’ll soon reach the Accumulation level. On this level, you make more than you spend so you are able to save for future unplanned expenses.

The next level is Independence. Since it’s unlikely you will be physically able to work your entire life, you eventually need to get to the point where you can pay all your expenses without working.

Finally, you reach the Utilization phase. This is when you know you’ll never run out of money so your sole financial focus is aligning your spending and giving (to charities, heirs, etc.) with your life’s purpose.

Usefulness of the Pyramid

The Hierarchy of Financial Needs is useful when talking about finances with other people because it allows you to be more understanding of different situations and more empathetic.

For example, it’s easy for someone on the Accumulation level to say, “Payday loans are bad and you should never use them” but if you are at the Survival level and have no other way to put food on the table for your kids, it may be something you are forced to consider.

And although we’d all like to think that Independence is what everyone should be focused on, someone who is at the Sustainability level may be too stressed to even think about something like that because they’re just one unexpected expense away from big problems.

So they first need to focus on increasing their income and/or lowering their expenses so they can reach the Accumulation level and then once they’ve built up a bit of a buffer (i.e. an emergency fund), they can think more about investing and pursuing FI.

My Journey

When I started writing this blog, I was on the Accumulation level so my primary focus was getting to the Independence level as quickly as possible.

The problem was, I don’t even think I realized there was a level above Independence that I should have also been thinking about and planning for.

In hindsight, this was a big mistake.

Because the real goal isn’t to have a lot of money.

As the idea of FIRE becomes more popular, it seems people are becoming more obsessed with FI and all they want to do is talk about FI, read about FI, and hang out with others pursuing FI.

This is useful for improving your finances but may cause you to miss the real point.

Financial independence isn’t life, it’s just a tool you can use to help you live a life that’s most meaningful to you.

It’s a means to an end, not the end itself.

The more you think about the top level of the pyramid while you’re on the journey to financial independence, the easier and more enjoyable that journey will be.

After achieving FI and accumulating more money than I had planned, I can now see the Utilization stage more clearly.

Is it the top of the pyramid? I’m not sure but it’s the level I’m focused on now and it’s what MMM has already been brilliantly writing about for years.

What is the Meaning of Life?

Before we can figure out how to best use our money for our life’s purpose, we have to figure out what that is first.

So what is the meaning of life?

That’s the big question and I’m still not exactly sure but I have a few theories…


At first, I thought the point was to achieve some sort of immortality.

If you’re immediately forgotten after dying, isn’t that like you were never here in the first place and isn’t that pretty meaningless?

To achieve immortality, or at least lengthen your impact on the world, I thought there were a few options:

Having Kids

Having kids seems to be the default option.

Of course your kids are going to remember you and then you have the added bonus of passing on some of your DNA to future generations.

Kids don’t guarantee immortality though.

Do you know anything about your great-great-great-great grandmother? No, me either.

Doing Something to Be Remembered

What if you instead do something memorable?

Einstein has been dead for over 60 years but he still lives on due to the things he accomplished when he was alive.

I thought this was the answer for a long time because it seemed like the best way to achieve something close to immortality.

But even that plan isn’t great either.

Memories fade. Civilizations die out. Planets are consumed by their suns.

Does it really matter being remembered for slightly longer than the average person?

Probably not.

When you realize how insignificant we are in the universe and how short our species has actually existed, can one little human actually make a noticeable dent in the grand scheme of things anyway?

Ignorance is Bliss

So if immortality isn’t the point, what is?

I’m not sure but I know one thing…these are very heavy things to think about!

I hate to admit this but at times during the past year, I’ve actually been jealous of people still in the daily grind because they’re too busy and preoccupied with normal life to think about stuff like this.

Everytime I think that though, I remind myself that it’s actually an incredible priviledge to face these big questions while I still have so many years (hopefully) to make adjustments and change course, if necessary.

Because I think everyone faces these questions eventually but unfortunately, many people face them on their death beds, when they are out of time and options.

There is No Point

The conclusion that I eventually arrived at was that there may not be a point.

It’s likely our existence is just a happy accident so the only point is to enjoy it as much as possible and help others enjoy it too.

That’s it.

If I was religious, maybe I’d think there’s a higher purpose or more to come after this life on Earth but I’m not, so I don’t.

At first, this conclusion may seem sad or anticlimactic but it’s actually very freeing.

No pursuit is more noble than any other so when you achieve FI and have the power to do whatever you want, you can just try to live the life that makes you happiest (assuming it doesn’t infringe on the happiness of others).

Any external pressures that have influenced your life in the past can all be ignored because no lifestyle is better than any other so just live the life you want to live.

What Life Do You Want to Live?

Figuring out what that life is though is also very tricky!

Just like people don’t know what makes them happier, they also don’t know what they want out of their lives.

For example, I thought I wanted to travel all the time after leaving my job but I tried it for a bit and realized that long-term travel isn’t as fulfilling as I expected.

Kobe Beef

This Kobe beef in Kobe, Japan was pretty damn good though

What I’ve now realized is that the reason traveling didn’t make me happier is because it didn’t align with my own personal purpose.

What’s Your Purpose?

So how do you figure out your purpose?

My buddy J.D. Roth from Get Rich Slowly and Money Boss suggests you try to craft a personal mission statement.

Can you boil down what you want your life to be in just one sentence?

After a lot of thought, I was able to come up with a sentence and here it is:

I want to learn and improve my skills so that I can create things that have a positive impact on my life and as many other people’s lives as possible.

Looking back at my past and reflecting on some of the best and most rewarding things I’ve done, they all seem to fit that one sentence.

This is why travelling wasn’t as fun and fulfilling as I thought it would be.

Sure, I had a great time experiencing new cultures, eating new food, seeing interesting sights but I wasn’t improving my skills (besides maybe my travel-hacking skills), I wasn’t really creating anything, and I wasn’t doing anything that positively impacted a lot of other people.

The Mad Fientist, on the other hand, does tick all those boxes and that’s why I still work so hard on it and get so much pleasure from it 6 years after I started it. I’m constantly trying to improve my writing/interview skills/etc., I frequently create new articles/podcast episodes/web applications/etc., and all those things hopefully help millions of other people improve the quality of their lives.

Asking Why

If the personal-mission-statement approach doesn’t work for you, another way to figure out your purpose is to identify something you’ve done in the past that was particularly fulfilling and then ask yourself why it was fulfilling and then keep asking yourself, “Why is that fulfilling?” until you can’t answer the question anymore (thanks to Vicki Robin for sharing this tactic with me when we were together in England last year).

Here’s how it works…

As I mentioned, the Mad Fientist has been incredibly rewarding so I’ll choose that (since you’re all obviously familiar with that project as well).

Why has the Mad Fientist been fulfilling?

Because it has allowed me to develop my writing skills, interview skills, and programming skills while helping myself and thousands of others reach financial independence sooner.

Why is that fulfilling?

Because it’s allowed me to learn new things, improve my skills, and help myself and others start living lives that are more enjoyable and purposeful.

Why is that fulfilling?

Because it’s allowed me to learn new things and improve my skills while also making my life and the lives of many other people better.

There it is! Asking “Why?” eventually got me to that mission statement I mentioned above.

Future Projects

Once you have a defined purpose, you can judge future plans against that purpose and figure out if what you plan to do has a high probability of improving your life or not.

I’ve actually been working for the past year on a secret project that I’ll share with you soon and luckily, it fits my purpose so that’s why I know it’s worth the effort and will likely be more rewarding than simply doing something fun like traveling around the world.

Moving to the Next Level

So that’s where my head’s been lately.

I definitely don’t have everything figured out and as I continue moving up to the next level of the pyramid, I’m sure there will be new challenges to face and interesting questions to try to answer.

As always, I’ll share what I learn along the way and don’t worry, I still love numbers so expect plenty more of those in the future as well :)

How about you? What kind of life will be most rewarding to look back on? What do you plan to do after you retire? Do those plans align with your purpose?

These are important questions to answer, no matter where you are on your journey to FI, so give them some thought and if you come up with your own personal mission statement, please share in the comments below to help inspire others!

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The New Tax Law and How It Impacts Your Early Retirement Fri, 22 Dec 2017 19:37:23 +0000 The most significant tax-reform bill in decades has just been signed into law and here's how it will impact your early-retirement plans.

The post The New Tax Law and How It Impacts Your Early Retirement appeared first on Mad Fientist.

The most significant tax-reform bill in decades has just been signed into law.

Although one of the primary goals of the new bill was to make taxes simpler, the tax code is still very complicated and littered with loopholes that we can take advantage of.

Some additional optimization opportunities have also emerged, which I’m excited to write about soon, so if you want to be notified when new articles are published, just enter your email below:

Today though, let’s dive into some of the strategies I’ve already written about to see what’s still possible under the new legislation…

Roth Conversion Ladder

The Roth Conversion Ladder is a strategy that allows you to legally access the funds in your retirement accounts before standard retirement age, without paying any penalties.

Here’s how it works:

  1. Contribute to pre-tax retirement accounts like 401(k)s, 403(b)s, Traditional IRAs, etc.
  2. Transfer your 401(k)/403(b) funds to a Traditional IRA
  3. Roll the money from your Traditional IRA over into a Roth IRA (paying tax on the conversion)
  4. Wait 5 years
  5. Withdraw the converted money, penalty free

Here’s a graphic that illustrates the strategy:

Roth Conversion Ladder

So is the Roth Conversion Ladder still valid under the new legislation?

Verdict: Still valid!

The new legislation still allows the Roth Conversion Ladder but if you decide to convert money from your Traditional IRA to your Roth IRA, you can no longer change your mind and undo the conversion.

Substantially Equal Periodic Payments

Another way of getting access to retirement account money early is through Substantially Equal Periodic Payments (SEPP).

Here is a graphic to illustrate this strategy:

Substantially Equal Periodic Payments (SEPP)

Verdict: Still valid!

The SEPP rules appear to be unchanged in the new legislation.

Backdoor Roth

The Backdoor Roth strategy allows someone who wouldn’t normally be able to contribute to a Roth IRA (due to exceeding the income limits) to legally fund a Roth account.

The way it works is this:

  1. Make contribution to a non-deductible Traditional IRA
  2. Immediately roll that money over into a Roth IRA

Verdict: Still Valid!

Since this is such a blatant skirting of the rules, I figured this loophole would be closed but it wasn’t!

The new tax legislation still allows for the Backdoor Roth but the only difference is, you can’t undo the Traditional-to-Roth conversion after you execute it.

Mega Backdoor Roth

The Mega Backdoor Roth is similar to the Backdoor Roth but it allows you to potentially contribute an extra $36,000 to your Roth IRA every year.

Here’s how it works:

  1. In addition to your normal pre-tax 401(k) contributions, make additional after-tax contributions
  2. Perform an in-service withdrawal and move your pre-tax contributions to a Traditional IRA and the after-tax contributions to a Roth IRA

Is the Mega Backdoor Roth IRA still possible with the new tax legislation?

Verdict: Still Valid!

This loophole has also survived!

Roth IRA Horse Race

The Roth IRA Horse Race is an advanced strategy that allows you juice your IRA conversions.

You can check out the link above to get all the details but you may not want to waste your time because now this strategy is…

Verdict: Eliminated!

You can no longer recharacterize or undo IRA conversions so sadly the Roth IRA Horse Race and all other IRA-recharacterization strategies are dead.

Tax-Loss Harvesting

Tax-Loss Harvesting is a strategy that allows you to lower your taxes by:

  1. Selling shares that have decreased in value
  2. Buying simliar but not identical shares (e.g. selling a Total Stock Market index fund and buying an S&P 500 index fund) so that you realize the loss but remain fully invested
  3. Using the tax loss to reduce your taxable income

Verdict: Still Valid!

You can still harvest your losses and use those losses to decrease your taxable income.

Tax-Gain Harvesting

Tax-Gain Harvesting is a strategy that allows you to increase your cost basis so that when you eventually sell shares, you have less gains to pay taxes on.

Here’s how it works:

  1. In tax years that you are in the 0% tax bracket for capital gains, you sell shares that have appreciated and pay tax on those gains (since you’re in the 0% bracket though, you actually pay nothing)
  2. Immediately buy back the same investment
  3. Since you bought the investment back at a higher price, you’ll have a higher cost basis and will therefore have less gains to pay taxes on when you eventually sell the investment (or you’ll have a bigger loss to harvest next time you do some tax-loss harvesting)

Verdict: Still Valid!

Specific Identification of Shares

To make tax-gain harvesting and tax-loss harvesting easier and more effective, you should set your taxable investment accounts to use Specific Identification of Shares so you can pick individiual shares to sell.

There were rumors that the new tax bill would require FIFO accounting (First In, First Out) but that didn’t make it into the final bill so Specific Identification of Shares has survived too!

Verdict: Still Valid!

Using the Health Savings Account as a Retirement Account

The HSA is actually the Ultimate Retirement Account when used as an investment account rather than a savings account.

Here is the strategy:

Maximize the Benefits of a Health Savings Account

Verdict: Still Valid!

Although the Obamacare individual mandate has been repealed, the HSA rules haven’t changed so this strategy is still valid!


It’s great that all the tax-avoidance strategies I’ve written about over the years (except for the Roth IRA Horse Race) have survived the new legislation.

Not only that, there seem to be some exciting new opportunities that early retirees can take advantage of so I look forward to exploring those soon (I’m looking at you, “20% deduction for pass-though entities”).

It will also be interesting to see if the new cap on state/local/property tax deductions causes people to focus more on domestic geographic arbitrage. Or, if the increased standard deduction makes people realize the mortgage interest deduction isn’t all it’s cracked up to be, resulting in more people renting instead of buying.

There’s still a lot to process with these changes but at least most of the core early retirement tax-avoidance strategies are still in place.

If you want to read more about the new tax legislation, check out this comprehensive summary by past podcast guest, Michael Kitces.

And if you’re a glutton for punishment and have nothing better to do over the holidays, here’s a link to the actual tax bill so you can see all the details.

What do you think? Will the new tax law help you achieve financial independence sooner? Are there any new strategies you plan to take advantage of? Anything you plan to do differently? Let me know in the comments below!

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Chris Hutchins – Why You Should “Retire” Before You Hit Your Number Tue, 19 Dec 2017 15:25:20 +0000 The founder of Grove shares important lessons he's learned as an entrepreneur and explains why you may want to quit your job before you hit your FI number!

The post Chris Hutchins – Why You Should “Retire” Before You Hit Your Number appeared first on Mad Fientist.

On today’s episode of the Financial Independence Podcast, I interview a serial entrepreneur who has achieved financial independence three different ways!

You’d think that selling a company to Google or buying San Francisco real estate before prices went crazy would be the best way to reach financial independence but that’s not been the case for today’s guest, Chris Hutchins from Grove.

Although he’s done all of those things, Chris shares how consistent saving actually impacted his net worth more than anything else.

This episode is packed full of useful information, especially if you plan to start your own business or want to do something meaningful after early retirement, so hope you enjoy it!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • What it’s like being an investment banker
  • How to get a job you really love
  • Biggest business lessons learned from working at Google Ventures
  • Why you should always say “Yes”
  • The benefits of doing something interesting every month
  • How aggressive saving can impact your net worth more than selling a company to Google or investing in San Francisco real estate
  • Why you should “retire” before you hit your FI number
  • My new favorite definition of retirement

Show Links

Full Transcript

Mad Fientist: Hey! Welcome everybody to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in the personal finance space to find out how they achieved financial independence.

Before we get into today’s show, I have a little holiday giveaway for you. Jim Collins from kindly donated a few audio book codes for the Simple Path to Wealth which is his book that he released this year that’s been an absolutely huge success.

So, if you want the chance to win one of those codes, then just go to, leave a review for the show and then shoot me an email just to say that you did it. And then I will pick a couple of winners from all the iTunes reviews I received in December, including my most recent review from swerty24 who says, “I’m the Oprah of financial independence.” So that was a very cool review. I enjoyed reading that. So thanks for that.

Anyway, onto today’s show! I’m excited to introduce my guest. And he’s a bit different than my other guests. He’s not a writer, he’s not a blogger. He’s a guy I met recently when I was in Dallas, Texas. And he has an incredibly interesting story.

So, this is a guy who has sold a company to Google, has invested in San Francisco real estate before it was crazy expensive like it is now. And despite all of that, he said that the thing that impacted his savings the most was saving. So just flat out boring saving is what contributed most to his financial independence.

He said financial independence about three different ways. He’s currently starting a new company even though he’s financially independent which is also something I wanted to talk to him about because the more I learn about financial dependence after quitting work, the more I see that people don’t just sit on beaches all day. So I wanted to chat with him about why he’s deciding to start another company at this stage and find out what motivates him these days.

So, we had a great discussion. There’s a lot of really good information in this episode, especially if you’re unsure about what you’re going to do after you achieve financial dependence, or if you’re interested in starting your own business. Chris, as a successful entrepreneur, he’s helped build lots of businesses when he worked at Google Ventures. And now he’s starting a company called Grove which is aiming to help people get control of their financial lives by combining technology with classic financial advisor advice. Really cool stuff! And he has a lot of great information and knowledge to share.

So, without further delay, here’s my interview with Chris Hutchins from

Mad Fientist: Hey Chris, thanks a lot for being here. I really appreciate it.

Chris Hutchins: Yeah, thanks for having me.

Mad Fientist: So, we just met in Dallas a couple of months ago. We both were invited kindly by Teresa and Shannon from the Center for Financial Services Innovation. We were invited to this really nice dinner for the Financial Solutions Lab which is something you’re a part of, right?

Chris Hutchins: Yes! Yeah, we are one of the eight companies they chose this year to be a part of their program.

Mad Fientist: That’s very cool. And yeah, I don’t know why I was chosen, but it was nice to join and get to talk to people like you. And before dinner started, we had this really good chat. And there was a few incredibly interesting things you said to me about your story. So I’m excited to chat to you about some of that stuff.

You mentioned that you’ve done a couple things that people think you need to do to become financially independent or wealthy. You sold a company to Google and you bought real estate in San Francisco back before it was really cool. So, those two are really interesting things that I definitely want to talk about.

But the thing that you said to me that just struck a chord was that, despite doing those two things, the thing that has impacted your net worth the most is just consistent saving. So tell me about that comment.

Chris Hutchins: Sure, yeah! So, like you, I have my own kind of my financial independence and situation spreadsheet. And as I look at it, I kind of have the categories of sources of money. And some of it was from when we were fortunate to sell a company to Google and some from the house. But the largest bucket by almost a factor of two is just real savings.

Mad Fientist: That’s incredible. So to give the audience an idea, how old are you currently?

Chris Hutchins: Sure! I’m 33 right now.

Mad Fientist: Wow! So 33, and you’ve done these amazing things, and yet savings is the biggest impact to your net worth.

To give people a little bit of background about you, can you talk about how you got into starting companies?

Chris Hutchins: Sure, yeah. I think if I go back to, I guess, high school (maybe before, but I’ll start there), I went to a school where a lot of people at my school had a lot more money than I did. Their parents gave them great allowances. And so I’d realized early if I’m going to be able to keep up, I need to figure something out.

So, I remember, in high school, I created t-shirts for our football games and sold them. I created a job at our school where—I ended up in a boarding school where I was like running the mail room.

And so, I’ve kind of always been creative in finding ways to generate income because I knew that I didn’t have what everyone else did and needed to figure out a creative way to do it. And that kind of grew on and on.

I didn’t know what I wanted to do after college, but I took the traditional route of a job at an investment bank and a management consulting firm and quickly realized that those things were not for me. And I think that’s what really sent me down this path of financial independence. I was like, “Man, these jobs are not for me. I don’t know what job is for me, but there’s no world in which I want to do a job I don’t love for the rest of my life. So I need to make some sort of radical change to save enough money because I have not yet found a job or a career that I love.”And if I don’t find it, I want to put myself in a position where I don’t have to be doing something less than exciting for the rest of my life.”

And that’s what kind of led me to be more entrepreneurial. I went to this event in New York called Startup Weekend. And it was basically an opportunity for a bunch of people to get together that are engineers and designers and business people and create a company over a weekend and launch a product.

And the products that were launched never really amassed anything. We made a Windows desktop app that would remind you every 20 or 40 minutes that you should get up and stretch. It’s called Desk Happy. It never went anywhere, but it kind of made me realize that “Wow! This is something I enjoy.” And almost immediately after that event, I told my wife, “We have to move to California. There’s people that are doing this thing that’s amazing and are starting companies.”

And I’ve always been a closet—or maybe not closet—Internet nerd. And so we started a process to move out to the Bay Area which is where I first found startups and just a sea of entrepreneurship. And that kind of drove me down the path of finding more and more things that I was excited about. But I kind of already put myself into the ways of really efficient living, optimizing everything, from travel to life to money. And so it just seemed like such a lucrative benefit of putting yourself on that track that, despite finding a career I liked, I just stayed on it.

Mad Fientist: Nice! That’s really impressive. and it’s impressive that you were able to do that as an investment banker or a management consultant as well. Those are two careers that are probably not many frugal people are hanging out in those circles. Isn’t that true?

Chris Hutchins: Yeah, those are not frugal careers. I did my investment banking stint for about nine or ten months, and I was like, “This just isn’t for me.” So I missed the majority of the compensation in those careers coming in the form of bonuses. So I didn’t stick around the first job long enough for a bonus. And the second job was at a company that eventually needed to be sold, but never paid bonuses the year I was there.

So, I was somewhat also in a situation where everyone around me were spending money as if they would make lots of bonuses, but I had never seen them.

I’m not surrounded by frugal people, but also not with enough money to be in New York and have a choice other than frugality.

Mad Fientist: And what is investment banking like? Obviously, it was not very fun for you if you’re less than nine months. But yeah, it’s always been something that’s intrigued me. What was the lifestyle like?

Chris Hutchins: I would think it’s a pretty demanding career—I mean to the extent I know about it. But I definitely have other friends in it. And it didn’t mean anything to me until I started interviewing in college. But essentially, investment banks were hired by other companies to assist and aid in transactions—mergers, acquisitions, IPO’s. And those things are always the most important thing to a company at the time. And the investment banks bear the brunt of a lot of the work.

And so, it’s the kind of job where—I think that my tipping point that came about 8 ½ months was that there was an entire week where, Monday through Friday, I got home after my wife had went to bed, and I left before she woke up. I was like, “It was not a fulfilling enough job to get home at midnight and leave at 5:30 or 6:00 in the morning to get to work because there was just so much to do. And I was so low on the totem pole that it was truly a 24/7 other than a few hours of sleep job.

Mad Fientist: Yeah, that does not sound like a good time.

So, you’re entrepreneurial pretty much from what you’ve said about growing up. It sounds like you’ve had that entrepreneurial spirit. Was it hard to convince your wife to just pick up and move all the way across the country or…?

Chris Hutchins: So, at the time, my wife didn’t totally love her job and didn’t totally love New York. So I said, “Hey, I want to move. These are the four cities that the company I work at has an office. I would love it to be San Francisco. But I know you don’t love New York. The other options were Boston and L.A. and Chicago.”

We went out to San Francisco for a weekend. And we were like, “This seems like the right of those places, so at least one of us would still have a job when we got there.” And San Francisco it is!

It just happened to be very, very perfectly aligned with this whole industry that I was just getting acquainted with. And it seemed like the perfect move.

Mad Fientist: And what year is this?

Chris Hutchins: October 31st 2008. And it seemed like we moved out to San Francisco, everything’s going well. And I think somewhere around November 20th—or maybe right after Thanksgiving before Christmas, but December/November 2008—I got a call at the management consulting firm I worked for to come meet with someone who I’d never heard of. It was a senior director. I came in and got laid off on the spot as part of the end of 2008.

Mad Fientist: Oh, man. Geez! Yeah, that’s a good time to get out of New York I guess. But you can’t really escape it in California either.

Chris Hutchins: Nope! So that kind of kicked me into an entrepreneurial spin too because it’s the end of 2008 and it’s not quite easy to get—you know, jobs aren’t just growing on trees. And I needed to do something with my time.

Mad Fientist: So, at this point, did you have enough saved up that you weren’t stressed or were you pretty much freaking out at this point?

Chris Hutchins: I think at this point I saved up enough that we weren’t too stressed out I think. I’m trying to put all the pieces together. My wife had already gotten a job in San Francisco in the first few months. She’d been interviewing. And she actually moved out a month before me.

And so, she had a job. We had an apartment. San Francisco hadn’t kind of hit the arc of becoming the most insanely expensive city in America yet. And so we had a buffer. It’s like, “Let’s figure out something because these last two things didn’t work out.”

Mad Fientist: So, did the entrepreneurship/starting a company start first or was the real estate something that you started looking into pretty much immediately after getting up there?

Chris Hutchins: Yeah. So when I got laid off, I was like, “I don’t know what to do.” But everyone else is in this situation, and I ended up starting—I guess not a company because we didn’t make money, but an organization called Laid Off Camp. So I was like there’s a lot of people in this circumstance, maybe there’s something we can all do together.”

So, I started this event. It was called Laid Off Camp. We did one in San Francisco. We had tons of media there because it was so timely. And we had hundreds of people show up. And it was kind of an ad hoc unconference where you had sessions being led by people who’d been in HR for their whole careers teaching people how to interview, you had younger kids teaching older people how to use LinkedIn, how to set up an online presence. And it kind of became this really supportive environment of people learning how to put their skills to use and freelance, what to do to start a company.

Everything kind of came together. And a few people came up from L.A. And then, they decided to, with my support, help put on one in L.A. And by the end of 2009, I think we’ve done 20 Laid Off Camps around the country.

Mad Fientist: Oh, wow! What a great idea. I know a lot of my listeners are interested in entrepreneurship and starting their own businesses. And that seems like a fantastic idea. You took the situation as it was, and you figured out a way to help other people in that situation. Is that what you found? You just need to be cognizant of what’s going on around you and figure out ways to help people. Is that how you structured some of your other companies.

Mad Fientist: Almost every kind of interesting or exciting opportunity, at least from an entrepreneurial, but if not, from a life standpoint, has always come from working on something, realizing there’s a big opportunity, and just being able to jump on it.

I think I had an assist from the fact that I got laid off. So I didn’t really have a choice . I didn’t have to make the decision to quit my job to pursue something. Someone else made that decision for me.

But just putting yourself in the right place and the right time, and taking advantage of interesting opportunities to learn or to try things out has been what kind of consistently led me to the next thing almost every time.

And almost as a life principle, I would say “just say yes.” If someone invites you to go to something that you’ve never done before, say yes. Go do it! Go somewhere new. Meet someone. Try something. It seems like when you open up the doors to everything, and you’re kind of aware of what’s going on—

It’s the reason we started the company I’m running now called Grove. I’m really interested in financial optimization. And I had a bunch of friends say, “Gosh! You should do this for a living,” and I was like, “Oh, I wonder what that would look like.” And that path led me down a road to eventually start a company that helps people with their finances and financial planning, to raise some venture capital money to do it, and to build that out.

So, it seems to be a consistent theme of just being aware of when opportunities are there and not being afraid to take it.

Mad Fientist: And it’s also proactively putting yourself in these positions too. We were just chatting before the call, and I was asking you how you found FinCon to be, and you said, “Yeah, it was great. It was my one thing that I do every month to put myself out there, and it paid off.”

So, can you talk a little bit about that goal for you and how that’s helped foster some of these opportunities?

Chris Hutchins: Yeah! So, I guess someone once told me that their new year’s resolution was to make sure that they did something interesting every month. And I thought, “Wow! That’s such a great idea.” And so, I immediately was like, “I’m going to do this, but I’m not going to do it this year. I’m going to do it the rest of my life.”

And so, I put together a spreadsheet of ideas. And I just made sure that every month for the rest of my life, I did something memorable, unique, something where I learned something, took some opportunity.”

I think that was in March of 2014 when I started. And since then, every month is accounted for.

Mad Fientist: Wow! That’s amazing. And can you give any examples of the most fun ones, the most lucrative ones, anything like that? Any ones that stand out that were just like, “Wow! I’m so glad that I did that.”

Chris Hutchins: Yes! So I’m trying to think of some random ones. Some of them are as small as I’d almost wanted to just host a multi-course dinner party. So I just planned a seven-course dinner that I cooked myself and invited a bunch of friends, things like I built an igloo in Colorado one winter and actually cut ice with a chainsaw and built blocks.

A woman that I had met and didn’t know very well had texted me on a random evening and said, “Hey, are you free on…”—I think it was like a Tuesday afternoon. And I was like, “Well, I’ve got work,” and I was like, “Why?” And I knew she used to work at the White House. I was like, “I could be free. What’s going on?” She’s like, “Oh, do you want to drive a press van when Obama is in town.”

I didn’t really know the full extent of what she was asking. And it turns out that when the president travels, they invite random citizens to drive all of the vans in the motorcade. And so, I’d taken the day off, and I ended up driving one of the staff vans in the presidential motorcade from San Francisco down to Stanford in Palo Alto, so the president could give a speech.

I met the president. And my wife was like, “Well, I have work. Should we do this?” And she ended up driving a press van. It seemed like something where on two days notice to just not go to work for a day and move things around for some random thing that a person you just met told you about, like don’t do it. But it ended up being some crazy wild experience.

Mad Fientist: Fantastic! So saying yes, that’s a good tip for everyone. And then, do you do anything to actively seek some of these stuff out?

Chris Hutchins: Yeah! So, what’s interesting is San Francisco has an opportunity for a random meet-up every day. And so I probably go to events around San Francisco somewhat regularly—a little bit less so since starting a company, but I’ve tried to create the bar of my monthly experiences as things that I couldn’t just do any day.

So, if you were talking to me in 2008 or 2007, I’d be like, “Yeah! Going to meet-up of entrepreneurs would totally be this monthly experience,” now in San Francisco, it’s like, “Oh, I could literally do that every night if I wanted to.”

And so I’ve been trying to raise the memorability bar to something that I would remember for the rest of my life. And that was really the idea. I didn’t want to ever look back on life and say, “April 2015, nothing happened. An entire month went by, and not one memorable thing ever happened.”

It seems like life should be something where, at least once a month, something memorable happens.

Mad Fientist: That is very cool. I really like that.

So, to get back to your story, you’ve just been laid off, you create this organization to help other people that are laid off. Where does that go from there?

Chris Hutchins: So, from there, I went down a path of helping people put these events on. We ended up having sponsors. I ended up meeting some of them. They were really excited by a few different random pieces of my past, one being putting these events on, one being doing some investment banking. And I ended up getting a couple of different freelance jobs.

And so, it turns out that actually ended up creating—while Laid Off Camp never made money, it did create an income stream through the relationships I built that sustained me for the next nine months. And because I was in laid-off mode, we were super efficient those next nine months.

I went to every event I could that had free meals. I would get company swags. I had tons of free shirts and all kinds of stuff.

Mad Fientist: That’s so cool. Yeah, it’s amazing what comes from things that don’t look like it can earn money themselves, but then they lead to other things.

And that’s sort of what happened with the Mad Fientist. It’s like you would never start a blog on financial independence and hope to make money over it because you’re telling everyone that reads your site not to buy anything or not to spend money. But then it’s just amazing .
Like the card tool that I created before the Mad Scientist is now starting to earn money as a result of having the Mad Fientist. It’s weird how that happens. But I think when you serve people and you help people out, then good things just come back to you some way.

Mad Fientist: Yeah, I think that’s my number one rule I tell people about financial independence. The creativity you get from having free time often leads to making money. So people are kind of rapidly trying to save enough so they can stop working, and then they have all of these interesting opportunities to pursue their passions. And maybe that’s a blog, maybe that’s a tool you make, maybe that’s a company you start. And then, you end up actually making more money than you thought.

So, it’s almost like you could take whatever you think you need for financial independence and hair cut it by 30%—you probably could argue that’s not the most conservative approach, but it seems to kind of be a rule of thumb that probably works more often than not.

Mad Fientist: Yeah, I couldn’t agree more. And the more and more people I interact with, not only bloggers and things (obviously, they have something that they’ve been working on even before financial independence), but just even people at the meet-ups that I go to, it’s just amazing what they’re doing, and yes, they’re generating a lot of income that they didn’t expect.

So, any time anyone asks, “Oh, the 4% rule, is that really going to be perfect for the future?” and it’s like, “Wow! Nobody ever knows.” But you’re 35 years old, you obviously are a hard worker, you’re intelligent, and you’ve been able to accomplish this. Even if the market’s tanked, I think you’re going to be fine, and you’ll figure out a way to earn money. And you’ll probably be earning money anyway that you didn’t expect.

So, to get back to your story, how did the company start that you eventually then sold to Google?

Chris Hutchins: Yeah! There’s a big long interlude that I’ll just skip over. And if we want to, we can come back.
My three contracts have come up. And my wife’s job that she had, she didn’t love that job, and it was not the best work environment. And we were like, “You know what? We’ve been being really efficient with our money which resulted in a little bit more savings that we had thought,” and I’d always been kind of a miles and points nerd, “We have some miles and points saved up,” and we just decided we were going to take two or three weeks and go on a trip before we kind of pedal to the metal and figure out what we want to do for our careers.

And that two to three weeks ended up turning into a seven-month trip around the world where we spent I think less than $30 a day for seven months. We were renting our apartment furnished back in San Francisco for a little bit more than we were paying for it because a furnished apartment can rent more. That whole trip ended up costing me like $7000. But I think the rent arbitrage ended up making us like $500 or $600 a month. So it ended up costing us just a few thousand dollars each.

And so, that happened. And we came back. And we were like, “We need to get serious about what we want to do.” And I had been given an opportunity to speak at a conference called South by Southwest. And we actually ended our trip flying straight from Singapore to Austin. And I gave a talk about being [fun employed] and how to turn that into something. And at that conference, I was like, “I know that I want to start a company one day. I know that I want to work in technology. I need to go spend a little bit more time learning. I’m going to find an amazing company.” And I sought out a company that I knew had a great group of investors, a great group of founders and employees and was in a kind of an interesting space at the time.

I went there. I wanted a job there. I did the atypical job search thing of, instead of sending a resume to a hundred companies, I just picked one company. I was like, “This is the company. I’m going to work at this company.” And every time I met someone, I was trying to find the right path to that company.

I ended up finding someone who convinced one of their investors to convince the founders to let me give them a presentation on why they should hire me. And so I put together like a 20-slide presentation and gave it to the two founders of the company and said, “This is why you should hire me.” And I think they turned around and said, “As I now know as a founder of a company, anyone that’s willing to go to those lengths to work here, we can find a way to make that hire.”

Mad Fientist: Right!

Chris Hutchins: And so, I worked there for about a year. And in that process, I had met a guy named Kevin Rose who had started a company called Digg before. And he was looking to start another company. And he was looking for someone that could just essentially hustle to figure whatever necessary out and just make everything happen.

And so, he had asked me, “Hey, do you want to come and start this company with me? We’re getting it off the ground. It’s going to be a mobile incubator.” And it just seemed like the perfect opportunity.

It was everything I like to do. It was a new challenge. It was starting at the ground floor. And that led to that company where we spent about a year trying a few different mobile apps. I ended up doing operations, HR, product management, finance, accounting, business development—basically, every function of the company.

And about 11 months into the company, Google+ was just trying to get a lot of their social efforts off the ground. And there was an opportunity for that team to transfer over to Google in what I guess you’d call an acqui-hire because they didn’t necessarily want to keep the product. And so we all went over there and worked for Google+ for a little bit.

Mad Fientist: Wow! That’s fantastic. And I just want to highlight the job searching advice again because I think that’s incredible advice. Rather than just spray out a hundred resumes, generic resumes, to a bunch of companies, just targeting one and then doing everything you can to get that job…

Yeah, I’ve been on the other side of the hiring table as well a little bit later in my career. And if somebody did that, it would just be like a no-brainer. If they worked that hard to get the job, then you know they’re going to really want the job and enjoy the job hopefully and keep working that hard for your company. So I think that’s just incredible advice.

So, you started working at Google. Actually, before that, I would like to just ask how that year was. Did you love it? Was it everything that you thought like entrepreneurship and startups would be?

Chris Hutchins: I think there’s this allure that entrepreneurship, running a company, starting is just like super easy and exciting and just amazing every day. And it’s a hard job.

I try to convince people not to start companies because I know that the people that end up doing it are probably the right people. And people that I can convince not to in a 5-minute conversation probably shouldn’t do it in the first place.

But yeah, I mean it’s tough. We launched a mobile app. We tried to figure out how to make it work. We thought it was an idea that people would like. The product was called Oink. And we let people rate things at places.

So if you went to a restaurant, you could rate the meal you had, you could rate the cocktail you’re drinking. If you went to a gallery, you could rate the exhibits or the pieces of art you saw. We thought it was a great way for people to find things more specific than a venue.

But it’s a lot of data to input. We add a core group of users that added the data. But most people just wanted to use the app. And there just wasn’t enough data in there. So it had a really chicken-and-egg problem which was we needed data at restaurants to let people rate things, but people didn’t want to put the data in unless the app was useful.

And so, it was tough trying to make everything work. And I think if you are cognizant of how tough it will be, you’ll force yourself only to work on things that you really care about which is why now that I’m running the company along with a good friend of mine as co-founder, we both care about the personal finance space so much that, when stuff is hard, it’s easy to overcome because you actually really care about you’re working on.

And I think that’s the most important lesson. Make sure that whatever you’re going to throw your life into, you care about at almost a crazy level because running a company is hard.

Mad Fientist: That’s really good advice too. And even something as just a silly little blog as well, it’s like you’ve got to love the topic to really write about it for long enough to see any sort of traction. And if you don’t, that’s why you see so many people just quit after a year because it’s not easy. And it takes a long time for any sort of success, which I’m sure it’s the same in the startup world as well.

Chris Hutchins: Yeah! I mean, at Google, my path led me to Google Ventures where I was a venture capitalist, and we’re investing in startups.

We kind of expected that, more often than not, our early stage investments would fail. Entrepreneurship and startups is not something where the hit rate from ground zero is like, nine out of ten times, it works out. So you just have to be aware of that.

I told someone once that you have to be aware of the fact that this company might not work out. Compartmentalize that, throw it away, and act every day as if it’s going to be the biggest thing in the world because you have people’s jobs depending on it, you have investors.
And so, I run every day as if it’s going to be incredible even though, deep in the back of my mind, I know it’s a hard thing to make work.

Mad Fientist: Sure. That’s definitely a good way to look at it because you can’t be just fearing that all the time, but you have to keep that in mind at some points too I’m sure. So you’d mentioned that you were renting out your house during this trip. So I assume that you had bought before all of this took place?

Chris Hutchins: No, actually, we were doing what I guess you would call rental arbitrage. We have rented an apartment. We had then sub-leased it on—I think at one point, a 3-month, and then a 2-month, and then another 2-month basis as a furnished apartment.
So, we hadn’t bought any property yet. It wasn’t until we came back from our trip that we started thinking about “Okay… well, where do we want to live? We’ve lived in this apartment for a long time.” It was one of those kind of industrial lofts where the bedroom looks down to the living room. So if you ever had friends or family stay over, everyone can see everyone at every point in time except in the bathroom.

So, there is very little privacy. My wife and I were both working when we got back. On a stressful day, if you want to just like to have your own space, it was like, “I’m going to go to the bathroom.”

And so, we were casually looking for places for maybe a year and a half once we got back from our trip. And it wasn’t until one weekend when my parents were in town—and when you’re in your late 20’s, and your parents are visiting a new city, it’s like, “What do you do with them when you’re not eating? Do you go to the museum…?”

And so, on the third day, it was like, “I don’t know what to do. Do you want to go look at houses? My parents were like, “Yeah! Let’s go look at open houses.”

And so, we just went to look at open houses. And it was on the last house that was supposed to close in five minutes that my wife and I just totally saw the opportunity to buy this house where there was essentially a third bedroom with its own entrance that we could turn into a studio. And we were like, “This is it!”

We knew we wanted a place where we could make it more affordable. And San Francisco’s a city at least where the cost to rent a room compared to the cost to buy the same number of square feet in mortgage payments is kind of opportune for the purchaser—at least it was five or six years ago.

So, it seemed like a great chance to do something. I was fortunate to be able to take out a second loan from my parents for part of the down payment and pay them back over time because San Francisco real estate is very expensive.

And so, I recognize that’s not something everyone has. And I’m pretty lucky for it. But the most amazing thing was finding a way to—I guess I now learned years later is called house hacking where you can turn a home you own into income that as property prices and real estate and rents went up, now actually pays for pretty much our entire cost of living.

Mad Fientist: Wow! That’s incredible. So you’re still living in the main house, but then you’re renting out the studio?

Chris Hutchins: Yeah! It’s a three bedroom house. And one of the bedrooms is on the ground floor. And we’re on the next floor up. It has its own entrance. And we installed a new lock on the door that locks from the inside. And we rented out like a studio.

In most cities, it would be strange to have a studio without a kitchen. But with so many startups in the Bay Area that provide all the meals and with restaurants and cafes on every corner, it ends up there are a ton of people who are young, single, don’t cook that are just looking for a place where they can have a nice bedroom and bathroom and don’t really care about the kitchen aspect. There’s a mini fridge and that kind of stuff in there.

And so, the income from that has helped us kind of subsidize the cost of living and put us in a situation to be able to save even more than we thought we could.

Mad Fientist: That’s really cool. And yeah, I would have never thought that you could rent a house without a kitchen, but it makes sense in the Bay Area, definitely. That’s crazy.

So, I’d like to chat a little bit about Google Ventures because I’m sure you learned a lot that you now are able to use as the founder of Grove. So what were some of those big lessons that you learned over those years working in Google Ventures? And how long did you actually work there for?

Chris Hutchins: So, I was at Google Ventures for about three years. I think in my time there, we probably did easily over a hundred investments. I was probably involved in 20 or 30 of them personally.

And man, I could probably write—I’m sure there are plenty of venture capitalists who could write longer books, but I feel like I learned so much as someone who both had started a company, went to Venture, and then left to start a company.

I think one of the biggest things was how important the people are—not just the people who start the company, which I would say was my number one requirement in investing in companies. At the earliest stages, it was never about some business plan that in fact if someone had sent me would be a deterrent from investing in their company. It was always about the people, how passionate they were about the industry.

You watch companies face adversity. And the thing that gets them through it is either luck or perseverance. And it’s really hard to bet on whether people will be lucky. So it was much easier to bet on people that seemed so passionate and resourceful about the thing they were doing that they would be able to get through anything.

And so, watching people do that was amazing. And it made me realize how important hiring is and how important finding the right people to surround yourself with at a company is.

And I never would have thought three or four years ago that, as the founder of a company, you would spend half your time on people. I thought, “Oh, half the time, I’ll be running the company and creating the products.” But I would say half the time…

And I would encourage other founders do the same, making sure the right people are in the room, making sure the people that are in the room are as efficient and empowered and capable as they are.

And so, we spent a long time finding the people who work at Grove now. And I couldn’t be more excited about the team we have. And I hope that just continues and it stays a focus. I don’t think we would be able to achieve any of what we’ve done or we will end up being as successful as I planned for us to be without all the people here. And it’s certainly impossible to do without them.

Mad Fientist: So, did you enjoy that side of it, the venture side, or did it get you itching to have your own startup? Is that how that led to Grove or…?

Chris Hutchins: So, I was [fortunate that timing] made it happen in that Google Ventures had gotten so big that we stopped doing early stage investing, and I kind of loved the early stage of it, so it forced me to think about what was next. I mean, it’s one of those things where you’re watching, and every day, someone comes in and says, “Here’s the dream. I’m going to go chase it. I’m more excited than you’ve ever seen excited about anything.” You’re like, “Great!” And then, they get to go do it. And you get to watch them do it.

That is something that I think people who have done it a few different times are like, “I remember that, the nostalgia. I’m okay not doing it.” And a lot of younger VC’s are like, “Yup! I want to go do that.”

And so, I wanted to make sure I wasn’t running blindly. I wasn’t just starting a company for the sake of starting a company. I didn’t want to just go, “Oh, I’m going to go start a company.” I wanted to be very aware of what I cared about, things that I loved, to make sure that if I did start a company, that it was something that, when times got tough, I would still be excited when I needed to convince people to join me on this journey. I could do it from the deepest bottom of my heart because I believed in it.

And I can imagine how hard it would be to do all of those things if it wasn’t something that was just so core to your passion.

Mad Fientist: So, that brings me to another question. So you’re financially independent. You probably made a good amount of money from selling a company to Google. Your real estate is paying your living expenses. And you’ve been a great saver.

So, is it that that made you start another company? You could’ve just hung out and went back to Southeast Asia and hung out on beaches with your wife if you wanted to.

What is it that made you want to start that company?

Chris Hutchins: Yeah. I mean I think similar to the way that I never knew there was an entire movement about financial independence, the US is interesting in that people don’t really talk about money.

And so, I had always been a great saver. I had convinced my wife to go down the crazy path of doing strange things to optimize money and travel and life. I convinced her it made sense to have random people live in our house with us to save money. And I think she’s on board though that wasn’t an easy adventure.

And what lead from that was, as I started to build a reputation in at least Silicon Valley with a lot of people as being this kind of crazy person that doesn’t have to sacrifice life to still be able to save.

I would say it’s maybe less about being frugal and more about optimizing for me. And so friends of mine would say, “I know you’re this person that’s always saving money and that’s always trying to be financially dependent. But you and your wife took a trip to Japan, and you did so many amazing things. I don’t understand.” And I was like, “Well, we’ve been playing the miles and points credit card game. That’s it!”

And a good recent example was a friend of mine. There’s a company called Peloton. And they make an indoor cycling bike with a built-in LD display and classes. And it ends up actually costing about $2500 to buy this indoor bike and $40 a month. But it beautiful. It has these great classes. And a friend of mine friended me on the platform and was like, “I don’t understand, you never spend any money, how do you have this expensive thing.” I was like, “Well, actually, I bought a $300 indoor bike. I mounted a couple of sensors that I bought for $30 on Amazon to it. And then I mounted an iPad to it. And now for about $400, I’ve built my own version of it—and I used their iPad app.
And so, my kind of mantra in life is I’m not trying to tell people to go stay at home, never eat out, never travel, and buy beans and rice so that you can retire early. Find the things that matter to you and optimize your life in a way that they can be affordable within your means so you can still do all the stuff you love.

And so, as I did that regularly and people kept bringing it up, they’re like, “Yea, how do I do that? Is there a service where, instead of asking you a question, we could like sit down, and you could just help me figure out how I could do that better?” I was like, “Surely, that exists… of course!” It’s like, “People had money issues for centuries. There has to be a way to make this happen.”

And I started looking at the industry. I was like, “Financial advisers, of course! Everyone needs a financial adviser. This must be what people are describing.” And as you look at the industry, you find out that most financial advisors in the US have no obligation to act in a client’s best interest.

And so many of them are pushing products that aren’t in people’s best interest. They’re pushing life insurance policies that make them really large commissions, but are nowhere near as good as the alternative. And so that’s not great.

Some of the ones who do have this fiduciary obligation to act in your best interest, many of those financial advisors only work with people with millions of dollars—which is great if you have millions of dollars, but not great if you’re trying to get to that point.
And so, I realized that there wasn’t really a resource other than reading blogs and learning to do something on your own for people to get financial advice before they had millions of dollars that was in their best interest.

Mad Fientist: And even the people that are reading the blogs. I get e-mails all the time who just want someone to look at their exact situation and help them with their exact numbers and not just some general numbers.

So, even the people that are reading the blogs, that’s still something that’s in high demand I would say.

Chris Hutchins: Yeah! And so, that was the conclusion we came to, was “This is crazy. There’s not a single affordable way for someone to get personalized financial advice.” All the startups I had seen had been focused on very specific problems like, “Oh, if you know you need to invest for 30 years, we’ll create an automatic rebalancing portfolio for you. It’s like an even better version of your 2040 retirement fund.” But when it comes to “Understand my situation. Help me figure out if I should be spending more, saving more, whether I have enough money to take this vacation or how to prepare to make sure that I can save enough to buy a home or send my kids to college,” there wasn’t a service that really was helpful that didn’t cost thousands of dollars a year.

And I was just so motivated by the fact that my life had seemingly been so fortunate and great because I had some of these core principles that I somehow was fortunate enough to be born into or learned. And for some people, coming to those conclusions is a lot more difficult.

And it seemed like this is something anyone can do. We have to find a way to make it possible because people would just be so much happier and so much less stressed. I’m sure you know money is one of the biggest causes of stress in the world and certainly in relationship issues and all kinds of stuff.

And so, if we could find a way to affordably help people be confident in their finances, we could do a lot of good.

Mad Fientist: That’s fantastic. So yeah, can you please describe what Grove offers?

Chris Hutchins: Yeah! So, we took a common principle of financial planning which is going through, taking an inventory of how you’re doing and planning for the short term and optimizing your situation. We kind of created a little bit of a program around it.
We hired a team of financial planners. We have CFP’s that work at Grove. And we offer financial planning. Right now, we will make a personalized financial plan. And you’ll work with a human to do that assisted by software we’ve built for $600.

I think the average cost of financial planning in the US right now is a little over $2500. And it’s primarily driven by poor software and a previous generation’s demand for services that were in person and very, very, very hand-holdy. And so we took the demands of a new generation and built some software, so that we could make financial planning affordable.

So, for $600, you can work with a financial planner. They will help you make sense of your situation and your goals. And we’ll build a personalized plan that walks through what you can be doing today and how you can plan for the future and how your current situation lines up with your goals and help you get on track to something that makes sense. And we’ll leave people with really actionable advice where they can know exactly what kind of account they should open and how much to put in it to start having an emergency fund or the exact investment options they should put in their 401k.

Mad Fientist: And so, their fiduciary advisors, you don’t have to worry about them selling you something that’s going to benefit them instead of you. So that’s fantastic.

And I’m assuming with your background, the advisers that you do have on staff are familiar with the whole financial dependence/retire early sort of thing that seems to be taking off all over the country these days?

Chris Hutchins: Yes. We were lucky. We found two amazing first CFP’s to join the team that are both in our generation and understand the modern needs of people in their late 20’s or 30’s, early 40’s, but who’ve also spent almost a decade each in the industry. So, we have both the relatability of someone that understands the needs of this generation, but also the experience of someone who’s seen a wide breadth of concerns and issues.

Mad Fientist: How big of a role does the technology play? Is that just like sort of streamlined the onboarding process so that the information that gets to the advisor is easier to then process? How does the technology integrate into your system?

Chris Hutchins: So, when you sign up for an account with Grove instead of kind of filling the traditional shoe box of financial statements, we’ve built technology to let you sync your accounts. That helps both for the ingestion of information early on, but it also helps down the road on an ongoing basis. Our advisors can kind of stay in tune with what’s going on and proactively be able to help reach out and help with things.

So, if an advisor noticed, “Oh, your bonus was paid out,”—hopefully, you work in a company, unlike me, where the bonuses do get paid out, hopefully we can help you figure out what to do and how to adjust your plan accordingly when things like that happen.

It also helps with just the creation of a financial plan. Traditional software would require the advisor to manually input a lot of data and would spit out a 50- or 60-page PDF that doesn’t make much sense. And so our software was designed with this generation in mind, so that the financial plans we generate for people are both personalized, but also just comprehensible. They make sense. We wrote them in kind of common, understandable English instead of lots of jargon-y terms. We have a full-time designers so that they actually look good and they make sense.

The bar is pretty low, but I think we’ve built the best financial plan there is. And so both technology and design have really made this something.

It’s a shame that with other advisers—and not all of them, but with many of them—you’re paying for an advisor to explain something to you because the end product was produced by software that feels like it’s a decade old when, if it were just designed properly, and it were written well, the average person could actually understand it themselves.

So, we’re trying to trim away the time that advisors spend doing things that people can do themselves and make sure that the advisors really add value in understanding someone’s unique circumstance or tackling a challenging issue instead of just walking someone through their net worth which is something that, if you design it right, people can understand on their own.

Mad Fientist: Very cool! If someone who is similar to you in that they get really excited about the idea of starting a business to help people and things like that, how big of a role do you think moving to San Francisco played? Is it worth doing in sucking up the higher cost of living to get out there to do these things? Or do you think you can do it elsewhere, it would just be a lot maybe more complicated or time consuming or it takes longer to get to where you’ve gotten to in your career?

Chris Hutchins: Yeah, I think it is an interesting question. A part of me wants to say, “Look, if you want to start a venture-backed technology company, and to do that, you want to hire the best talent of engineers and designers, and you want access to capital and everything, San Francisco, you could make a compelling case, is the best place in the world to do it.”

But if your bar isn’t “I want to start the hardest technology company in the world, and I need access to the best engineers,” and you want to start a company, and you want to provide a service, and maybe you want investors, and maybe you don’t, I’m not convinced that you have to do it in San Francisco.

There are great investor ecosystems in cities all around the world—New York, Boston, Chicago, Denver, Austin, Texas, LA, London. There’s a lot going on in Southeast Asia. There’s a lot going on in Japan, in Korea and the UK.

So, I’m not convinced people have to move to San Francisco. I think that if a company ends up going down a path to being the next Google, Apple, Tesla, it will probably ultimately make sense for them to have some amount of the company based here because that’s where a lot of the talent is.

But a lot of what I got from being in San Francisco could have happened for a few week-long trips where you go meet a lot of people, go to a lot of events, schedule a lot of meetings. But some of it is just the serendipity of you’re at a dinner and you run into someone and that conversation leads to something that maybe is next week, and if you didn’t live here, it would be hard to do.

So, I’m a little torn. I think there are some amazing people that end up in cities all around the country. And I could imagine if, having started Grove in Austin or New York, I don’t think it would have held us back. But I guess it depends how important the capital needs and the human resource needs are to how important it is to be in those hubs. It’s certainly a lot cheaper to start a company, hire a team, rent an office basically anywhere else in the world. So it is not necessary to be in the Bay Area. But I would if you’re serious about starting a technology company. I would make sure you spend a few weeks out here just meeting interesting people.

Mad Fientist: The other question I had is everything you learned from Google Ventures and your experience with that—obviously, you’re too busy now, but later on in your career, do you ever see yourself doing any angel investing or…?

Chris Hutchins: It’s funny. While you could look at my path and say, “Wow! You’re really risky. You left jobs and you took the path of entrepreneurship,” when it comes to my personal financial situation, I’m fairly conservative.

I like to save a lot of money. I like to do index fund investing. I’m not on the train of dumping my entire net worth into Bitcoin right now.

And so, when I think about angel investing, it’s really a tough subject for me personally because I feel like I have access to lots of interesting companies and I’ve had the opportunity to invest in companies that ended up doing really well.

But my kind of personal financial independence journey and my risk profile doesn’t totally match up with the incredible amount of risk that comes with angel investing and investing in private companies.

And so, at least for the time being where I work at a super early stage startup (my wife works at a late stage startup), we live in the Bay Area where real estate prices are tied to the tech industry, it seems like all my investing personally would probably benefit from being a little bit removed from the same market dynamics.

But I could see if we ended up retiring and moving out of the Bay Area and not working startup jobs, would that be a good part of diversifying the portfolio? I could see that. But for me, I tend to tell people that to make angel investing work, you really need to make sure that you’re going to write 10 or 20 different investment checks. And the minimum amount of investment for a lot of companies are anywhere from $10,000 to $25,000. And so if you’re going to write ten $20,000 checks, you need to set aside $200,000 to really get into angel investing.

And I have been very fortunate—but not fortunate enough—that I have $200,000 that I want to allocate to something that risky.

And so, for me, it doesn’t fit into the profile. But I say that and I have friends that have put a few thousand dollars (and maybe $10,000 or $20,000) in companies and turned it into millions of dollars. And I’m like, “Man, that was…”

If you had put all of your net worth into Bitcoin a year ago, you’ll be happy today. But the risk that comes with that—it would also shock no one if the price of Bitcoin tomorrow—and the funny thing is it doesn’t matter when you listen to this podcast. If the price of Bitcoin tomorrow drops by 50%, I still don’t think anyone would be shocked.

And so, I don’t know. I like to play a little bit more conservative with my finances given how much risk I take in my day-to-day life and job.

Mad Fientist: That sounds like a very wise move. You mentioned retirement. And obviously, you’ve saved for financial independence and have been a great saver and investor over the years. Can you ever see yourself actually retiring?

Chris Hutchins: Yes. I considered myself retired when I left Google. And so, in my mind, I am retired right now. But retirement to me means you are only working on things you care about. You’re not having to do a job for the purpose of making money that you don’t love.

And so, in my mind, I kind of am retired. But from the perspective of not doing anything from day to day—you know, when my wife and I traveled for seven months, six months in, we were kind of like, “We just have to do something. We want to get back to work.”

And so, I’ve been in a place where six months was as long as I could go without doing anything. And so what that means is probably not. I will probably be finding some way to fulfill my drive and passions and energy that isn’t just sitting on a beach or on the porch reading probably for the rest of my life.

My dad is almost 70 now. And I think he’s still going. He runs a good part of the company he works at. He’s talking about retirement. And in his mind, retirement is stopping working 50 hours a week and starting working 30 hours a week. It’s not stopping working.

So, I would be shocked if there’s ever a time where I just want to sit around and do nothing. That doesn’t seem that exciting to me.

Mad Fientist: Nope, me either. And yeah, I’m impressed you lasted six months. I think by two and a half months, I was like, “Alright! I need to do something. This is crazy.” Even though it was super fun—nice Thai beach, perfect weather, great food, super cheap—I was like, “No, I need to get back.”

Chris Hutchins: [cross-talking 57:54]

Mad Fientist: Oh, it’s amazing, isn’t it? So good.

So, I usually end all my interviews with just asking what’s one piece of advice you would have for someone who’s hoping to achieve financial independence?

Chris Hutchins: Yeah. My biggest piece of advice is two things that I’m straddling. Well, the biggest one is just evaluate everything on whether it makes you actually happy. There’s a great book I read called Happy Money which has presented me with a lot of data to think about what really makes you happy . And in a world where people are buying new sneakers and buying hand bags and clothes that are really expensive, I kind of came to the conclusion that like those things didn’t make my life more fulfilling.
And so, the easier you can get out of the mindset of spending money on things you don’t need, the easier it is to start to save more.

The biggest rule of thumb I tell everyone is it’s almost impossible to find an investment where you can double your money. But if you can cut your spending in half, you’ve essentially done that.

Mad Fientist: Right, instantly.

Chris Hutchins: And so, just being more aware of how you’re spending and optimizing it exclusively around happiness, and not what you think society is telling you, and getting really creative about things, whether it’s points and miles or those crazy sites where you click shopping portal cashback links, all those things end up adding up over the over the years. And the more you do and the less you spend, the easier it is.

My framework for savings isn’t atypical. A lot of people I talk to, they’re like, “I’m going to save 20%.” As far as I’m concerned, a hundred percent of every dollar my wife and I make goes into savings. And I treat every expense as “Do I want to dip into my savings to make this purchase?”

And so, it can be overwhelming for some people to make the transition to that idea. But in my mind, my savings rate is a hundred percent. Everything goes into savings. And if I want to buy a pair of shoes, does this pair of shoes compare to where this money will be if it earns interest and compounds over the years?

There was a great conversation someone had with Warren Buffett where he was trying to buy furniture in his house. HIs wife suggested this couch. She’s like, “But it’s only $700, and it will last 30 years.” He’s like, “No, it’s not only $700 because if that $700 compounds over the next 30 years, it’s so much more. So what you don’t get is that this is actually like a $10,000 couch.”

Mad Fientist: Yeah, that’s a great answer. And it’s amazing how similar we are. And as you were talking earlier about just optimizing, I think that’s just the key. You’re not depriving yourself. You’re just optimizing.

And everything that you’ve talked about, it’s like, “Yeah, I do that,” all the travel hacking, all the shopping portals. And it does add up. It’s just amazing. You feel like you can do everything you want to do.

So, thank you so much for coming on the show. It’s been fantastic. If people want to learn more about Grove or maybe get in touch with you, what’s the best way? Just go to

Chris Hutchins: Yeah, you can find me—Grove is I’m @Hutchins on Twitter. And yeah, feel free to reach out. Check us out.

Actually, I could probably set up And anyone that goes to that link could just jump through the wait list right now if people want to check it out.

Mad Fientist: Oh, cool! Yeah, I’ll link to that in the show notes. And yeah, thank you so much. Again, it’s just been a pleasure. And hopefully, I’ll see you in San Francisco next time we’re there.

Chris Hutchins: Yeah! I’m excited. Come on out. And thanks for having me. This has been great. It’s not every day you get to spend some time talking to people that think so similarly about savings and stuff in a day and age where people are spending lots.

Mad Fientist: Absolutely! Alright, man, I appreciate it. Hopefully, I’ll speak to you soon.

Chris Hutchins: Sounds good! Take care.

Mad Fientist: Alright, bye.

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]]> 23
Physician on FIRE – Geographic Arbitrage, Sunk Costs, and Gangsta Rap Tue, 14 Nov 2017 10:00:29 +0000 Mr. and Mrs. 1500 from join me as cohosts for a live Financial Independence Podcast interview with the Physician on FIRE!

The post Physician on FIRE – Geographic Arbitrage, Sunk Costs, and Gangsta Rap appeared first on Mad Fientist.

It’s been a while since I posted a new Financial Independence Podcast episode but I’m excited to share one with you today!

Mr. and Mrs. 1500 from joined me live at FinCon in Dallas to interview the Physician on FIRE!

Podcasting Bug

The Podcasting Bug

We sadly only had 25 minutes to record so it’s a short interview but it’s a fun one.

If you ever wanted to hear Mrs. 1500 rap, this episode is definitely for you :)

And if you ever wanted to hear what a podcast sounds like when two out of the three hosts are ridiculously hungover, this one is also for you (see if you can figure out which host is the sensible one).

I’ll be back to my longer, more in-depth interviews soon but for now, I hope you enjoy this wild and entertaining conversation with the Physician on FIRE!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • How to separate your identity from your job
  • Using geographic arbitrage to spend less while getting paid more (without ever leaving the United States)
  • How to deal with sunk costs
  • What it’s like finding FIRE after already achieving financial independence
  • Plus, an amazing (and original) gangsta rap verse performed by Mrs. 1500!

Show Links

Full Transcript

Mad Fientist: Hey! Welcome, everybody, to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in the personal finance space to find out how they achieved financial independence.

I know it’s been a while since I’ve released an episode. And I’m sorry for that. I’ve been traveling quite a bit for the last few months. But I’m back in Scotland now. And I have a lot of really exciting episodes planned for the rest of the year. So I’m excited to be back behind the mic. And I’m looking forward to sharing this episode with you today because it’s a special one.

You may remember in previous episodes, I’ve recorded podcasts live from FinCon, the financial blogger conference. And this year was no different.

So, I was just in Dallas for FinCon 2017. I had a great time. I got to record on the podcasting stage there. And if you recall from previous years, every time I’ve recorded live at FinCon, I’ve had Mr. & Mrs. 1500 from joining me. In 2015, they interviewed me for episode #14. And in 2016, I interviewed them for episode #26.

For this year, I figured why not they join me as co-host and we can interview someone else.

So, that’s exactly what we did. And we had the pleasure of talking to the Physician on FIRE from The one problem with the recording at FinCon is they only give you like 25 minutes. So we didn’t have a full episode like you’re used to, but we had a really fine chat.

So, this is a nice introduction to the Physician on FIRE. And hopefully, I can get him back one day to do a full episode, so we can really dive deep into his story and what he’s learned on his path of financial independence.

But this is a really fun episode. There’s lots of craziness. Any time you hang out with the 1500’s, there’s going to be some surprises. And this was definitely no different.

I hope you enjoy it. Thanks again to Mr. & Mrs.1500 for co-hosting. Thanks to the Physician on FIRE for joining me for what was a very unorthodox episode. And thank you guys for listening. I’m excited to be back. I look forward to putting out more episodes soon.

But now, here’s the live episode from FinCon ’17. I hope you enjoy it.

Mad Fientist: Hey! Welcome to the Financial Independence Podcast. This is a very special episode today. We are recording live in Dallas from FinCon. We are staring at a VW Bug that has been converted into a podcast boost which I put a picture up in the shownotes.

And Mindy, you’re showing me something?

Mrs. 1500: Special thanks to the FinCon Podcast Network for sponsoring our live podcast recording at FinCon 2017.

Mad Fientist: Wow! You are perfect. That sounded great. Thanks! That was a little sneak-peek-a-hoo we have here.

So, in the past three years, I’ve done a live podcast from FinCon. The first year, the 1500’s from interviewed me. And then, I interviewed them. And I thought, “I can’t do a live podcast without them.” So this year, they’re co-hosting. So say hello!

Mrs. 1500: Hello! Thanks for having me.

Mr. 1500: Yeah, thanks for having us again. It’s a pleasure.

Mad Fientist: And today, they’re going to help me interview none other than the Physician on FIRE.

Physician on FIRE: Hi! Thanks for having me. It’s great to see you guys again.

Mrs. 1500: Welcome to our podcast!

Physician on FIRE: Yeah! Happy to be here.

Mr. 1500: I’m honored. My wife and I had the honor of visiting the Physician on FIRE at his house. And the thing about him is he wrote a post a while ago about how he’s just a normal, average guy. And that’s completely true. If you meet this guy, and you go to his house, he could be your doctor, but he could be your garbage man too. You just don’t know.

And I thought about that with the Happy Philosopher interview that you did I think a couple of podcasts ago. Mad Fientist said, “What’s the deal? How do you separate your identity?” What Jeff, the Happy Philosopher, said was “Doctors, their whole identity is tied up. Your whole life is being a doctor.” But you, it’s not like that at all. You’re just a normal, average guy who happens to go and stick needles in people through your job maybe.

I saw your house. It was a modest house. But do you have like a secret doctor bat cave with a Mercedes for every day of the week that you are hiding from us?

Mrs. 1500: No, I’m jumping in here. He doesn’t have a modest house. He doesn’t have a doctor house. But he has a beautiful house. He has spent a lot of time furnishing this amazing house. You walk into this house, and it looks like he hired somebody. But he did it all himself. It’s beautiful! You should post pictures of your house.

Physician on FIRE: Thank you, Mindy. I think I might have one in a post somewhere. I have to find it. It might be in my 50 Ways I’d Like to Enjoy a Retirement. Like you said, I did actually go out and find some mid-century modern furniture and re-finished it myself.

There’s one shot of our living room. So if you dig in there, you’ll find it. But thank you for the compliment.

Mrs. 1500: It’s a beautiful house. I’m really jealous.

Mr. 1500: We really do like it.

Mrs. 1500: My house is like mid-century kids trashed the furniture.

Physician on FIRE: Yeah, yeah.

Mrs. 1500: So, okay. I’m sorry. Back to Carl’s question. How do you separate yourself?

Physician on FIRE: How do I separate myself from my job? I’ve always viewed it as a great job. Many physicians do feel that it’s a calling and maybe had a little bit of a higher esteem. But to me, it’s been a great way to make a living. But when I leave the house, when I take up the scrubs, I’m just your, like you say, ordinary, average guy—or at least I try to be.

Mrs. 1500: A great way to make a living. Ten dollars an hour, right?

Physician on FIRE: Yeah! Sometimes, $12 if you work overtime.

Mr. 1500: So, my next question is how do you reconcile your sunk cost. You’re a physician, you went to school. And then you went to more school. And then, you probably went to more school after that. Then you did a residency. You’ve got a whole lot of time.

And I know you’re a smart dude, so you got some scholarships. But how do you reconcile all that work and time with early retirement. And I should mention, you just went part-time this month, is that correct?

Physician on FIRE: I did, yeah. It’s been great. I haven’t quite had the time to really feel the relaxation from working less because I’ve been to two conferences here in one week. I just went to the biggest anesthesia conference in the world. And I’m at the biggest personal finance blogging conference in the world.

But back to your question, I like to look at life going forward, decide what’s best from this point on. And looking back, it doesn’t really help. It doesn’t really make a difference.

There’s something in psychology called the sunk cost fallacy where you’re thinking about what you’ve already done and using that to decide how to live the rest of your life or the rest of your day. It doesn’t really help.

So, I just look at what I want to do next week, next month and next year, and figure it out from there.

Mad Fientist: That’s a fantastic way to approach it.

So, for some of the people in the audience who may not be aware of Physician on FIRE, maybe just give a little bit of a background, your story, and why you decided to pursue financial independence.

Physician on FIRE: Sure! So, like Mindy mentioned, I do stick needles into people. I do that as an anesthesiology to also help get them through surgery safely. And I’ve been an anesthesiologist now for 11+ years. And for a few weeks, I’m now a part-time anesthesiologist which is a good way to be.

How I became a blogger? Like 88% of your guests, they say they read something about Mr. Money Mustache.

Mrs. 1500: Who’s that?

Physician on FIRE: He’s your neighbor.

Mrs. 1500: Hush!

Physician on FIRE: Oh, never mind. I read him, found him, through just a news article in Market Watch. I came back to it when I was just studying for a board exam. That was just a real pain. It wasn’t any fun. I was spending all these time studying. I thought, “Gosh! I’m going to have to do this again in 10 years, aren’t I?” Then I thought, “Wait! I read about that guy, Pete. Now, what’s his name?”

I found his blog. I started thinking a little bit differently about the next 10 years. And then, I found the White Coat Investor who’s now a partner of mine in my site. We collaborate. But he’s got a great site that teaches physicians about personal finance topics. And I guess I tried to take some of the best elements of those two personas and those two sites. And I launched my own blog.

Mad Fientist: Nice!

Physician on FIRE: That’s about a year and nine months ago.

Mad Fientist: Nice. And so, you’re cutting back to part-time. What do you think your post-FI life is going to look like when it settles down with all these conferences?

Physician on FIRE: Well, we’ve got some pretty great plans. Like I said, we look at what we want to do going forward. And one of those things is to travel more and not just take vacation where you’re just seeing three sites a day and exhausted when you get home.

So, in November coming up, we’re taking three weeks and doing a Spanish immersion experience as a family. We’re going to attend a local school in a Spanish-speaking country and just try to live like the locals (or maybe a little better than the local). And we’ll plan a few trips like that.

I was talking with Mrs. Waffles on Wednesday who I see just 8 ft. away from us. She did a mission trip in Peru last year and just thought it was a remarkable experience. And if I can find a similar mission type trip, I’ll take the family so my kids can see what it’s like to live in a third world country, maybe help some people, play with kids in an orphanage, whatever it is that they might do during the day. That’ll be awesome. So I’m looking for something like that too.

Mad Fientist: Very cool! And I apologize to the audience for rushing through this. We have a 25-minute time constraint.

Physician on FIRE: Yeah.

Mad Fientist: So, we’re going to try to pack a lot in, but I could always get him back on later to do a proper episode.

But one of the key points to your story that I wanted to touch on was your geographic arbitrage that you did throughout your career because it’s unique in a couple of ways: 1) it was all within the US and 2) it actually was more pay than you would’ve gotten had you lived somewhere more expensive.

So, please just talk a little bit about that.

Physician on FIRE: Right! Well, first, you have to question your motive because I used to rank number one in Google for geographic arbitrage. But now, you rank number one. And now you’re bringing it up again. And on your site, it’s going to be in the shownotes.

Mrs. 1500: Ooh, nice play, Mad Fi.

Physician on FIRE: So I’ll have to republish my post and maybe try to sneak up at the top.

But no… in medicine, it’s rather unique in that there are jobs in rural America, in smaller cities, in middle America that pay better than cities on the coast that might be seen as more desirable. And so, those places also that have the higher pay tend to have lower cost of living. And that’s a double win if you’re someone that isn’t interested in living in San Francisco, New York, LA, et cetera.

And we both grew up, my wife and I, in small towns in the upper Midwest. And that’s where we are now. And it’s worked out really well help me become financially independent within 10 years.

Mad Fientist: It’s amazing! And it helps not being in one of those big cities too for the lifestyle inflation that maybe plague some of your colleagues.

Physician on FIRE: Right! I hear like the parking lots at the Medical Center in UCLA are going to have a whole lot of different cars than we do in Minnesota—a lot of trucks and Fords, Chevys, Hondas, et cetera.

Mad Fientist: Nice!

Physician on FIRE: Fewer Joneses to keep up with.

Mr. 1500: Okay! I’ve got a professional question for you at this time. Well, let me back up a second. I was a computer programmer. And I spent $3800 on my education. I found that hard to get over. So I can’t imagine what you’re going through with the sunk cost. But that was not my question.

My question was, sometimes, when I was at work, I would leave and I’d take my computer home, and I’d do some of my own work with my work computer. It wasn’t probably ethical. It’s probably against my contract. But I did it anyway.

As an anesthesiologist, do you ever bring nitrous home and…?

Mrs. 1500: You can’t ask him that! Shut up! Not on the…

Mr. 1500: Ladies and gentleman, that was a joke. The Physician on FIRE holds himself to the highest ethical standards.

Mrs. 1500: When we were at his house earlier this summer, I asked him the same question like, “Can you prescribe me drugs?” I’m not looking for them. It was just like a question like, “Can you do it? Can you prescribe your wife drugs? Can you…?” He’s like, “Technically, you can. But that’s not a thing. It’s way better to not.”

Physician on FIRE: It’s ill-advised. And yeah, you have to keep actual progress notes, like a medical record of some kind to back up that prescription. And of course, there are certain kinds of prescriptions, kinds that you’re probably looking for even though you said you weren’t that would never risk for friends and family.

Mrs. 1500: I think he did say one time he prescribed an antibiotic for his kid over Christmas or something, but maybe not even that…?

Physician on FIRE: No, I haven’t even done that. We go to the doctor, the real doctors.

Mrs. 1500: You go straight to the doctors.

Physician on FIRE: I’m an anesthesiologist.

Mrs. 1500: I mean, with all the i’s you need to dot and t’s you have to cross, it just doesn’t seem worth it.

Physician on FIRE: I’d be very careful.

Mrs. 1500: It’s so easy, but so much hassle.

Mad Fientist: Maybe you’re trying to force his hand at early retirement by getting him to…

Mr. 1500: Yeah, that would take care of that in a hurry once the license is gone. Well, I’m just thinking about how bad you would feel if you maybe don’t do a complete exam and then maybe you get a bad diagnosis, a wrong diagnosis, for a friend or your own son…

Mrs. 1500: Can you refill my Oxy prescription? I’m just kidding! I’m not even on Oxy.

Physician on FIRE: Do you have those bigger pockets full of cash? No, that was all a joke.

Mrs. 1500: Okay, we should get back to the real topics.

Mad Fientist: Yeah, we’ll bring it back around again.

Mr. 1500: I’m sorry. This’ll be my last podcast with the Mad Fientist.

Mad Fientist: No, no. This is perfect.

Mrs. 1500: This will be your last podcast ever.

Mad Fientist: So they say you’re a very normal guy. Was that always the case as a doctor? Or once you found FI, did you change and then became less on that normal doctor path?

Physician on FIRE: Right! I think I’m starting to find normal—probably abnormal for a physician, and maybe more normal for the average person.

But I didn’t really change much. When I found FI, when I discovered what it was, what it meant, I realized I had it. And so that made it pretty easy. It was kind of an amazing discovery because I hadn’t really thought about the concept of not working—at least until my kids were up and out of the house. Our boys and 7 and 9 years old right now. When I discovered this, they were not even kindergarten and preschool age.

Mad Fientist: So, I know Mr. 1500 has some closing questions. So I’m going to hit up my own pre-closing questions that I always like to ask people just so we get to it eventually because who knows what Mr. 1500 has in store for us. I don’t know personally, so I’m excited to see.

But if you have to give a piece of advice to somebody, what’s the one piece of advice would you give to somebody on the journey to financial independence?

Physician on FIRE: I would listen to the Mad Fientist.

Mad Fientist: Nice!

Physician on FIRE: I would read my article on geographic arbitrage…

Mad Fientist: …while I’ll link to in the shownotes. I’ll give you some of that good follow.

Physician on FIRE: Alright! And just try to minimize how much money flows out from your investments. So minimize your fees, minimize taxes in the tax records. Most physicians, that’s a really big deal.

Mad Fientist: There was also one thing I wanted to cover—unless you want to jump in? No, you’re good? Yeah. So if people want to get in touch with you, learn more, what’s the best way to reach you?

Physician on FIRE: Come to my site, I’m on Twitter, @physicianonfire.

Mad Fientist: Nice! And also, you donate profits that you make from the blog to charity?

Physician on FIRE: Right! So I have started to realize a little bit of money from people coming to visit the site. And I donate half the profits to charity, mostly through our donor-adviced fund. And it’s easy to do because, like I said, when I came to start this blog, I was already financially independent. So it’s kind of all gravy to help some local and national charities. And it’s a wonderful thing to do.

Mad Fientist: That’s fantastic! So, Mr. 1500, I see you chomping at the bit over there for either a question. We got these thoughts in time. I just wanted to get those out of the way and I can…

Physician on FIRE: The anticipation is palpable.

Mr. 1500: Oh, no, I think we’re good. I’d like to let the audience know that I haven’t even been drinking it.

Mad Fientist: I was promised beer, by the way.

Physician on FIRE: I know!

Mrs. 1500: Not today. Well, technically, you were drinking today.

Mr. 1500: Yeah. Technically, yeah. It was a late night last night. So if my voice is a bit off…

Mad Fientist: So, I just wanted to thank these guys for co-hosting with me because it was the most ridiculous late night. I haven’t had that much good beer. That was something that Carl put together. He put together an amazing beer-tasting event where everyone brought great beers from where they live, and we had them last night.

And it has been an awful morning. I promised everyone beer here, but I couldn’t even think about bringing it down because I think if any of you had opened it, and I smelled it, I would have to end this very early.

Mr. 1500: And I left at midnight because nothing good ever happens after midnight. But it was a great time!

Mrs. 1500: I want to shout out to Wiley Roots Brewing in Greeley, Colorado for giving me some really great beer to share with you.

Mad Fientist: Oh, it was amazing!

Mrs. 1500: That was difficult this morning, but it was so good last night.

Mad Fientist: It was fantastic!

Mrs. 1500: Speaking of pint glasses that you drink beer out of, how was that for a smooth segway?

Mr. 1500: So, I saw your Twitter feed […] Most anesthesiologists, I wouldn’t think would be big fans of gangster rap. Are you a gangster rap aficionado? Were you ever a rapper?

Physician on FIRE: Well, I’m more a fan of his message, it’s very similar to mine—how you live in biggie smalls and mansions and benzes. That’s kind of what I try to tell people to do.

Mrs. 1500: The notorious PoF.

Physician on FIRE: That’s right.

Mad Fientist: That’s awesome! So you are an early ‘90s gangster rap fan?

Physician on FIRE: It’s kind of what I grew up with. I like a whole lot of different stuff, not country. But yes, I do. I do enjoy it.

Mad Fientist: That is a secret that I am not sure—like my entire college career was spent learning Bone Thugs & Harmony lyrics so that I could rap them perfectly. So that is amazing. That’s great to know about you. And we’ll make the next two nights of parties even more fun if we had a rap battle.

Physician on FIRE: Absolutely! Yeah, yeah […]

♪ Baby, I got yo’ money. ♪

Mr. 1500: May I ask you what kind of car you have?

Physician on FIRE: Yes, I drive a Chevy HHR.

Mr. 1500: Yeah! That thing with bulletproof windows, armored doors or…?

Physician on FIRE: Sixteen switches.

Mr. 1500: So, there’s some action up there in Minnesota.

Mad Fientist: Right!

Mr. 1500: Well, we have a special way to close. And actually, Notorious B.I.G., even though he’s dead, is going to make a reappearance as Notorious P.O.F. So here we go! Brace yourselves, audience. Oh, yeah, I’m sorry. We have to get the lyrics. It’s not like we just planned this five minutes ago or anything like that.

Mrs. 1500: I did not spend the early ‘90s learning Biggie lyrics.

Physician on FIRE: Meaning you did not memorize?

Mrs. 1500: I did not.

Mr. 1500: But Mrs. 1500 was actually a rapper. Not many people know this. Here she comes out of her rapping career.
♪ [rapping]♪

Mrs. 1500: Physician on FIRE, can’t you see all the other doctors drive Mercedes? And you don’t even fly first-class. I bet you even take up your own trash.

Physician on FIRE: Yup!

Mrs. 1500: Physician on FIRE, can’t you see…?

Physician on FIRE: Uh-huh…?

Mrs. 1500: Sometimes, your nitrous just puts me to sleep. And I just love your frugal ways. Everyone broke while you get paid.

Mad Fientist: That was awesome.

Mr. 1500: Thank you.

Mad Fientist: That was amazing!

Mrs. 1500: I just won the rap battle.

Physician on FIRE: You did! I did a little improv, “Uh-huh… uh-huh…”

Mad Fientist:That was a fantastic ending! So thank you to the 1500’s for being with me here onstage again. It’s been a fun tradition that I hope we’ll continue. We’ll have to figure out some other way to do it next year.

Mr. 1500: Thank you so much for having us.

Physician on FIRE: Yeah, thank you for inviting me.

Mad Fientist: And Physician on FIRE, yeah, thank you so much for being here. It was a pleasure. And hopefully, I’ll chat to you more at another stage when we actually have more time.

Physician on FIRE: We can do that. I would love that.

Mad Fientist: Awesome! Thanks, guys. Bye.

Mrs. 1500: Thank you.

Mr. 1500: Thank you.

Physician on FIRE: Thank you.

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]]> 18
Michael Kitces – The 4% Rule and Financial Planning for Early Retirement Thu, 31 Aug 2017 09:01:23 +0000 Retirement researcher and financial planner, Michael Kitces, joins me to discuss safe withdrawal rates and how to effectively plan for early retirement!

The post Michael Kitces – The 4% Rule and Financial Planning for Early Retirement appeared first on Mad Fientist.

One of the internet’s most-respected retirement researchers and financial planners, Michael Kitces, joins me for an episode of the Financial Independence Podcast!

You may remember that my Safe Withdrawal Rate post drew heavily from the incredible research Kitces has done on the topic so it was great to talk to him directly to dive even deeper into important topics related to early retirement.

During the interview, we discuss…

  • Safe Withdrawal Rates and whether the 4% rule is still safe in the current market environment
  • The unique challenges early retirees face that normal retirees don’t (and also some of the unique advantages early retirees have)
  • How Michael tackles early retirement from a financial planning perspective

If you’re worried about figuring out how much you can withdraw from your portfolio after you retire, this episode is for you!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • Why Michael began researching safe withdrawal rates
  • What the Shiller CAPE is and how it can be used to determine a better safe withdrawal rate
  • Why the initial criticism of the 4% rule was that it was too low
  • What would be a safe withdrawal rate to use today, considering current market valuations
  • Human capital vs. financial capital and the advantages of having both
  • How to find a financial advisor and what Michael would do if a client came to him with early retirement plans
  • The biggest wild card that early retirees need to be concerned with that standard retirees don’t

Show Links

Full Transcript

Mad Fientist: Hey! Welcome, everybody, to the Financial Independence Podcast, the podcast that gets inside the brains of some of the best and brightest in the personal finance space to find out how they achieved financial independence.

Today’s guests, I’m super excited about. It is Michael Kitces from And if you’re not familiar with his work, he is one of the Internet’s most respected retirement researchers and financial planners. And if you read my Safe Withdrawal Rate post, his research was the core driver for that post. I referenced many of his articles and white papers. He’s just created some great stuff.

And he’s an incredible guy. I’ll list some of his qualifications. He’s got a Master of Science in Financial Services. He’s got a master’s in taxation. He’s a certified financial planner, a chartered life underwriter, a chartered financial consultant. And he speaks probably at I think like 50 to 70 events every year talking about all this stuff. And he’s got over 17 years of experience in the business.

So, loads of knowledge. He puts out some great content. And I’m excited to dive in deeper and really talk to him about unique challenges that early retirees in particular face and to dive into some of the early retirement research that he’s done and the research into safe withdrawal rates.

So, before I get him on the program, I wanted to run a quick experiment. This story just proves how bad I am at like internet business stuff.

As I mentioned in my First Year of Freedom post that I released earlier in the month, the credit card search tool I created has been bringing in some unexpected income. So rather than just keep that income and be taxed on it, I’ve been trying to think of ways to reinvest it.

So, I was listening to a podcast at the gym, and I was like, “Oh, maybe that would be a good way to reinvest the money. I could pay for advertising on somebody else’s podcast, and then tell more people about the credit card search tool. And that may be a good investment. That would be a way to spend some of these profits productively.”

It wasn’t until later that I thought to myself, “Hey, you idiot, you have your own podcast, and you haven’t even tested it out there.

So why would you pay money to put an ad on somebody else’s podcast when you don’t even know if podcast advertising works.”

Really stupid not think of that. But I’m going to test it out here.

So, this episode is brought to you by the Mad Fientist Travel Credit Card Tool. So if you go to, you’ll be shown a list of all the best sign-up bonuses currently on the market today.

The real power of the app though is in the filter. If you know you want to earn BA miles, for instance, you can just select BA, and it’ll automatically display all the best sign-up bonuses that will earn you BA miles, which is really useful in today’s complicated travel environment because there are all these different kinds of flexible points that transfer to various airlines and hotels. It’s really complicated to figure out which cards actually would earn you the most points for a particular program.

The filter also lets you filter out cards with annual fees or first year fees. So you can find the exact card that’s going to be the best for your travel needs. So again, head over to You can check it out there and let me know what you think.

And I’ll be able to see if podcast advertising actually does work. And then, I could decide whether I want to actually invests in podcast advertising elsewhere.

So, thanks for letting me run this experiment. And without any further delay, welcome, Michael Kitces. Thank you so much for being here. I appreciate it.

Michael Kitces: Thank you! Good to be here in the Mad Fientist laboratory.

Mad Fientist: Yeah, I’m excited to have you here. I’m really thankful you’re able to do this especially considering how busy you are. You’re one of the busiest guys I know. So, maybe just give people out there an idea of what Michael Kitces’ life is like.

Michael Kitces: Oh, man! So, I work a couple of different hats. I am a partner and the Director of Wealth Management for the Pinnacle Advisory Group, an independent management wealth firm in the Baltimore, Washington area, overseeing about $1.8 billion dollars for more than the thousand clients that we work with.

I’m also the co-founder of a group called the XY Planning Network which is a community of about 450 financial advisors specifically focused on working with younger folks, with Gen X and Gen Y people. That’s the XY in the name. And our focus there is doing financial planning for people for just an ongoing monthly subscription fee. So many advisors in our world require big asset accounts or sell products. And our focus is just straight, independent fee per service advice, pay on an ongoing subscription to work with an advisor in an ongoing relationship. And we’ve got a couple hundred advisors that have joined that.

And then, I publish a blog myself called the Nerds Eye View. So of course, I have a an affinity for laboratories and all things science and research. And I’ve been running that for, gosh, almost 10 years now with kind of a range of topics we cover there. About half of it is actually for the advisory industry. So, we talk about practice management trends and business strategy for advisors. But the other half, much of my work in my career has been around retirement research and kind of the intersections of retirements and investment theory as well as retirements and tax strategies.

And so, I publish a lot of research both in some of the journal publications for financial advisors as well as a lot of research that we just publish directly on my own site of all the stuff that we’re studying and analyzing about how to do retirement and make it work better.

Mad Fientist: And that’s fantastic stuff that I stumbled across. I’m not sure when or how, but yeah, I’ve been a reader of your blog for many years. It’s just fantastic stuff.

If anyone out there had read my Safe Withdrawal Rate post, they’ll know that I linked to probably about five different posts that you had written on that were just like incredible. That post could have been a book report of all of these—and it pretty much was.

Michael Kitces: Much appreciated! I know it’s the cool just about blogging and publishing research from—you live it as well. As a blogger, there’s nothing more exciting like, “Oh, my God! Someone linked back to me, reference something that I wrote. It’s so exciting!” And so I’m just thrilled to see that it’s getting out there and getting read, and hopefully having some helpful, positive impact for people who are trying to plan their retirement path.

Mad Fientist: Absolutely! It was incredibly helpful for me. And yeah, everyone that’s read that post hopefully has got a lot out of it as well.

So, I’d actually like to talk to you about that research you did into safe withdrawal rates, if you don’t mind.

Michael Kitces: Sure!

Mad Fientist: That seems to be one of your biggest areas of research. So, how did you start looking into that? And what caused you to really dive deep into that research?

Michael Kitces: The safe withdrawal rate research has been kind of an interesting path for me. I really came and into spending a lot of time studying it in the early, mid-2000’s.

So, as you know, the original version of a study that put that on the radar screen for the advisor community was an article by Bill Bengen in the October 1994 issue of the Journal of Financial Planning. And the research has kind of lingered out there in the advisory community. Not only did it not get a lot of adoption in the early years. Bengen, at the time, was actually pretty harshly criticized by the advisor community who said that 4% number, that’s just ridiculously crazy low.

Mad Fientist: Right!

Michael Kitces: Why would you spend that little? In 1994, I’m like, “I know how to solve retirement. You just pull out a spreadsheet. You put in that the long-term return of stocks is 10% to 12%. You buy a diversified portfolio. You calculate how to amortize your portfolio over a multi-decade time period. And it’ll tell you that you can spend like 6.5% or 7% because that’s what you get when you plug in 12% returns on stocks which back then would have been like a conservative estimate by some people’s views.” So, he got lambasted for being too low.

And in the mid-2000’s, I was working at the Pinnacle Advisory Group as the Director of Financial Planning at the time. And my job was to build out and develop our financial planning process. And we had a strong focus on working with retirees—we still do. And so it was my job to kind of take in the research and figure out how we’re going to analyze and evaluate retirement situations.

And so, that for me was at least the starting point of starting to gobble up some of the safe withdrawal rate research as well as spending a lot of time looking at the Monte Carlo Analysis Tool. There are a lot of different modeling techniques that have evolved in the preceding 10 or 15 years around retirement.

Up until basically the 1980s, your retirement was basically just “buy bonds, invest, and spend the interest” or “buy stocks and spend the dividends.” Unless you wanted to literally pull out an abacus, it was kind of hard to do all the number crunching to figure out what sort of retirement would work.

It wasn’t until the ‘80s, late ‘80s, showed up when we started getting personal computers that we could actually begin modeling this stuff (no coincidence that Bengen’s study came out a couple of years later).

And so, the 1990s and the early 2000s was kind of an explosion of all these different tools and techniques to analyze retirement. And I was trying to take them all in to figure out how we were going to do it and build an approach for our clients.

And at the same time, I was also deeply involved with our investment team. And our investment team at Pinnacle, we’re not fans of trying to time markets and buy individual stocks. We just find markets are way too efficient to really be able to add a lot of value there.

But it still gets pretty clear to basic level that bonds that yield two are probably going to produce less of a return than bonds that yield eight, and stocks with an earnings yield of two are probably going to produce less than stocks with an earnings yield of eight.

And earnings yields is really just P/E ratios and valuation flipped upside-down. And so we kind of came at investing with this view and philosophy that valuation matters. When you want to set everything from a reasonable allocation for a retirement portfolio to just figuring out what you can spend, knowing that stuff has really lousy yields matters, and knowing that stuff is really good yields matters. And that needs to be weighed in the consideration.

And so, I was kind of at this point of spending a whole lot of time looking at safe withdrawal rate research as well as Monte Carlo tools and all these different ways to model retirement while I was also immersed in an investment team that had a very long-term valuation-driven investment process. And it kind of led me to bringing the two together to say, “Well, what happens if you actually start looking at all of this retirement withdrawal research through the lens of market valuation.”

And that was what led to the study I’d put forth in 2008 that basically said, “What happens if we take something like long-term valuation measures (so Shiller P/E ratios, the CAPE 10 ratio), and then screen what’s actually happened with withdrawal rates using Shiller CAPE,” which now, CAPE has become very popular as a mechanism to look at. The fact that Shiller got a Nobel Prize didn’t really hurt so much.

Back then, no one was talking about it. No one knew what it was. The first thing I had to do when I talked about the research was just explain what a cyclically adjusted P/E ratio was and all the work that Schiller had done in creating that measure.

But what I found was that when you look historically in all the time periods where you had to use the safe withdrawal rates number where you can only take out like 4% to 4.5% of your initial account balance adjusting subsequently for inflation, that initial withdrawal rate was really only set by like three or four different starting points for retirement in history, all of which were time periods where you retired when valuations were really, really high.

And it turned out all of the historical scenarios that necessitated these really low withdrawal rates were specifically environments that were high valuation. If you got into merely average valuations, it really wasn’t a 4% rule, it was a 5% rule. And if you got into cheaper valuations, it was more like a 5.5% to 6% rule.

And so, we published this study that said, “If you want to figure out how to set an appropriate initial withdrawal rate, and what’s a sustainable portfolio, you’ve really got to look at what’s going on with overall valuation levels of the market at the time because 4%, frankly”—and we wrote it at the time. It was a good idea at the time. I published this in the early 2008. I said valuations are really high, you really should be spending conservatively because there’s a risk of a material market decline (not actually knowing that was going to play out within six months when I published the study). And so it kind of worked in that context.

But then, likewise, after we went through a market decline, and we had people coming in in 2009 and 2010 and saying, “Well, what can I spend?” well, the answer was it’s really not a 4% rule for you anymore, it’s a 5% rule.

Five percent is a slightly smaller account balance (which is kind of a bummer from the bear market), but the withdrawal rate is different after you see that kind of market volatility and stocks get cheaper.

And that’s a really important thing to consider when you’re trying to set policy around “how much of this can I spend” or conversely, “do I have enough in my retirement assets to make this retirement goal work? Am I actually financially independent?”

Mad Fientist: I’m looking at the graph that you created with the safe withdrawal rates versus the Shiller inverse of the P/E 10, and it’s just amazing, lots of correlation there. And I will link to that in the show notes. I think it’s in your Understanding Sequence of Return Risk post…

Michael Kitces: Yes.

Mad Fientist: But yeah, it’s just incredible that you could predict these safe withdrawal rates based on something that you can look at today. It’s that predictive. That must’ve been an incredible realization.

Michael Kitces: Yeah, it was pretty striking when I really finished that first study, that first take on it, and just started this modeling of P/E ratios and subsequent safe withdrawal rates.

We’ll make sure you get a link to the original report that we actually did which was all the way back in May 2008. We called it the Kitces Report. It was the research, white papers, that I was publishing at the time—and still do.

We had this chart in there. I still remember working on it where like, “Alright! Well, let’s plug in P/E 10 ratios at the beginning of retirement, and then the safe withdrawal rate for retirement, and see how well these things line up. It was just the perfect mirror image to each other that the predictive value was phenomenally high. I think it was like a 0. 74 correlation.

Actually, my background, I was a psychology major. And in psych research, the brain and human psychology is so complex that, if you’re doing a psych study, and you get results that have like a correlation of 0.1, you get excited. If you get a correlation of 0.2, it’s basically guaranteed to publish as long as you don’t screw up the article or you didn’t have broken methods.

So, to find this correlation of 0.74 between valuation levels and 30-year safe withdrawal rates that no one had ever written about before, I got pretty excited at the time.

Mad Fientist: That’s crazy. Yeah, I’m actually looking, and it’s 0.79 actually too. So it’s even better than 0.74, it looks like. When you look at the graph, it’s just such a clear trend.

So, for people who maybe are in their car right now and aren’t able to google Schiller CAPE 10, can you just give a little description about it, and talk about why it is so predictive in this case?

Michael Kitces: Yeah! So, the idea of Shiller CAPE and this P/E 10—so, the basic idea of a P/E ratio is, as the name imply, P and E. The P is the price and the E is the earnings of the company. And I find for most people, it’s easiest to actually think about it as the flipside, which is an E/P ratio—earnings on top.

So, when you think of any investment like a bond, a bond pays 5%—or a bond pays 3%.So, if a bond pays 3%, that simply means, for every dollar that you put in, you’re going to get ¢3 back as a yield.

And stocks really mechanically function the same way. If I’m running a business, and my businesses are worth say $100, for every hundred dollars of business value, if my E/P ratio is 3, that means for every hundred dollars of business value I have, I make earnings of 3%.

Now, with businesses, it’s a little bit more complex because I actually get a choice. As a business owner, I can take that 3% and keep it and re-invest in my company, I can take that 3% and pay it out to the shareholders as a dividend. Most companies do a blend of each. They pay a sum up to dividends, and they keep the rest. But if you hope that they’d re-invest the money productively into something that helps to grow the company, whether they re-invest it themselves or they give it to you, it’s kind of there for future growth.

And so, if we look at just the earnings of a company relative to the price, we can get an understanding of its yield or what kinds of earning power it’s generating.

And it really functions pretty similar to bonds. Things that have high earnings yields are producing a lot of dollars; things that have lower earnings yields produce very few dollars for each hundred dollars of value in the company.

So, in the stock world, we tend to flip that yield over. And instead of talking about it as earnings over profits, we talk about it as price over the earnings—and so P/E. So, if you think of something that has a 3% ratio, that means it’s generating $3 of earnings for every hundred dollars of profits. And I flip that over, I get 100/3 which means my P/E ratio is 33—or 33.333 (repeating).
And so, we can look at this to start understanding what kinds of perspective earnings power does this company have. High P/E ratios means low earnings yield; low P/E ratios mean higher earnings yield and so and so. In this case, low P/E’s are good, high P/E’s are bad.

Now, the problem with this in the short-term is that companies are volatile. Some have good years, some have bad years. 2008, the whole S&P and the aggregate lost money because the financials lost as much money as the rest of the economy put together or as the rest of the S&P stocks put together. And so, because earnings get really, really volatile, it gets challenging to use earnings from year to year as a measurement of valuation.

And 2008 is actually a really good example. 2008 was so horrible that companies hardly made any money, which means if you calculated a P/ E ratio, the price over the earnings, and the earnings went to zero. Because the market was so bad, the market had this implied P/E ratio of a thousand or basically of infinity if you try to literally divide by zero. Even though they actually just crashed and went down 40%-something, in theory, it should be a lot cheaper after they just went on sale by 40%. Yet if you calculate a traditional P/E ratio, the E is so volatile in a recession that it makes them look worse after the crash than it does before.

So, to fix this, the great revelation of Schiller was that, instead of just taking the current earnings of the company and dividing that to the stock’s price, you take a 10-year average of the last 10 years worth of earnings.

So, by the time you take a 10-year average of company earnings, you start to smooth this out a little bit. Yeah, there are some bad years in there, but there’s also some good years. They kind of offset each other. And you get to a balancing point that starts to work.

And that was basically what Shiller found. If we take a 10-year average of earnings, we get a pretty stable predictor of earnings yields valuation and a pretty strong relationship to subsequent returns, particularly long-term returns.

That Shiller P/E 10 ratio actually doesn’t do a very good job at all of telling you where the market’s going to be in the next three or six or twelve month. But it’s amazingly good at telling you what’s going to be going on in the markets over the next 10 years and whether the next 10 years are going to be good or bad which is really important when you’re talking about retirement distributions because, as we know, the biggest driver of the long-term outcomes is the sequence risk—basically, what happens in the first decade.

So, if you know a valuation and a measure like Shiller P/E 10 tells you what’s going on with valuation over the next 10 years or it tells you what returns are likely to be over the next 10 years and whether they’re going to be above average or below average, that becomes incredibly informative about whether you can take a higher or lower withdrawal rate than 4%. And that was basically what we found in the research.

Mad Fientist: That’s amazing! So right now, we’re sitting at CAPE of 30. We’re getting into really high territory. I think the only other time it’s been higher is leading up to the big crash in the 2000s.

Michael Kitces: Yup!

Mad Fientist: So, we’re sitting at high CAPE. But there’s a floor to the safe withdrawal rate that you found. Can you talk a little bit about that?

Michael Kitces: Yeah. You know, as bad as it can get when you get these bad sequences, what we still ultimately found is it still doesn’t seem to get any worse than about 4%.

Even when we look at horrible time periods like if you retired in 1929 on the eve of the Great Depression, the market went down about 85% in the first three years. Fortunately, if you had a diversified portfolio with some bonds in there, you mitigated that a little bit.

But that’s horrific, truly horrific. It makes the financial crisis look mild by comparison. But the market really did go down about 85% from top to bottom from 1929 to 1932. Yet the 4% rule worked through that time period—the combination, the diversification, and keeping our spending modest, and frankly, the fact that the Great Depression had a lot of deflation which is really bad economically, but is technically good if you’re a retiree. It means, bad news, the market went down; the good news, you don’t need as much for your portfolio anyways because everything got cheaper (because that’s what happens with deflation, the stock gets cheaper).

And so, this 4% initial withdrawal rate worked.

And likewise, when we look at other time periods, like retiring in the mid-1960s, the interesting historical footnote, 1966 was the first year that the dow hit a thousand. And unfortunately, it actually wasn’t a very good year in the markets. The markets had to pullback. It took them a couple years to recover. And by early 1973, the dow still was not any materially higher than a thousand.

Then ’73/’74 bear market crash happens, and the market declined about 45% from top to bottom. And it took another eight years for the market to recover.

So, in 1981, the dow was still at a thousand, trying to break through to a new high.

So, if you imagine being in retirement, and for the first 15 years, the market gives you no capital appreciation whatsoever, you begin to get a sense of what it was like to be a 1966 retiree.

Now, on top of that, it gets even worse because inflation went from about two to twelve, which also caused the worst bond bear market of the century at the same time that stocks generated no appreciation for 15 years.

Mad Fientist: Geez!

Michael Kitces: And despite that, or even through all of that, what we find is this 4% initial withdrawal rate adjusting for inflation works.

Now, the good news for both these time periods—retiring on the eve of the Great Depression and the 1966—is the second half of your retirement was great. In fact, the 30-year returns were not that bad. They were only down a little bit. But the first half of retirement was so horrific in these scenarios that you needed to spend a more conservative number so you had enough money left for when the good returns finally showed up because finally stocks are super cheap.

When you got to the bottom in 1981, the bad news is you made no appreciation on stocks for 15 years. The good news was stocks were giving cash dividend yields of like 7% to 9% by the end of that.

So, you weren’t making any appreciation, but the economy kept growing. And if your stock isn’t going up while your economy is growing, eventually, there’s just more and more earnings powering through, and you’re getting bigger dividends. And eventually, you start to make it up.

But what we find is this 4% number just seems to work. And I don’t think there’s anything really magical or sacred about it. It’s really just a recognition that if you actually look historically, we’re pretty consistent that about once every 20 or 30 years, we do something really, really bad and dumb to our economy. I mean, we kind of do it like clockwork.

We did it in the 1970s. 1966 was kind of a slow start, but the bad stuff didn’t really hit until the 1970s. We did it during the Great Depression in the ‘30s. If you actually go thirty years back before that, we did it in the first decade of the 1900s as well. A giant national financial crisis completely froze the economy, ultra low interest rates, massive real estate crisis (actually surprisingly similar to the one we had in 2008).

And so, we just seem to do these every 20 or 30 years. We did it in the first decade of the 1900s, we did it in the 1930s, we did it in the 1970s. And then, we did it to ourselves in the 2000s. And what we find is 4% just seems to be a number that’s low enough that, even if you start when valuations are high, and risk is elevated, or returns are likely low, and then you add a whole bunch of bad stuff on top, the withdrawal rate is moderate enough that you can still make it to the good returns.

Mad Fientist: Right!

Michael Kitces: You still have something left, some moderate amount left, so that when the good returns finally show up, you can work through to the end.

And when we actually look even in the international data, you see something pretty similar. Safe withdrawal rates in even places like Canada and Australia were right in this 3.5% to 4.5% range as well.

It stays pretty stable around the globe with kind of the small historical asterisk that, if you’re a retiree in a country that loses a global war, it doesn’t go well for you. So if you run the safe withdrawal rate of a 1939 retiree in Japan, your safe withdrawal rate is like 0.5% because you’re actually losing global war and getting hit with nuclear bombs. It really does bad things to your economy. Safe withdrawal rate in Germany was about 1% to 2%; in Italy, it was about 1.5%.

Those kinds of like truly external global war sorts of events still change this number because now you’re not just talking about “Hey, we made some bad decisions for our economy, and we’ve got to heal them,” now you’re talking about like we destroyed all of our factories and lost a third of our working populations to death and war. Unfortunately, things on that order of magnitude can still break even that 4% rule.

But literally, it’s about what it takes. Short of anything from that, we find this number in about 3.5% to 4.5% seems to work pretty much around the globe.

And most of those studies are actually just based on very simple [unintelligible 29:51] portfolios, large cap stocks, and government bonds. And of course, today, we tend to own more diversified portfolios which actually just brings even a little bit more stability to those results.

Mad Fientist: And it’s worth mentioning, we’ve been focusing on the worst case scenarios here. I’m just going to quote some of the things that you said in some of your other posts like “the safe withdrawal rate actually has a 96% probability of leaving more than all of your original starting principle.”

Michael Kitces: Yes!

Mad Fientist: So, it even survives all these terrible times. But in most cases, it’s doing even better than surviving. You’re going to have a lot more money than you even started with

So, like over two-thirds of the time, the retiree would finish with more than double their starting principle, 66%. You’ve doubled your money, and you’ve lived off of it for 30 years.

Michael Kitces: Yeah.

Mad Fientist: My audience is all early retirees or people that are hoping to retire early. So a lot of questions that I get are: “Well, yeah. All these studies are great, but they focus on a 30-year time horizon. I’m only 30, and I’m hopefully going to live another 60 years. So what does that do to my safe withdrawal rate?”

You’ve actually done research on that. So can you just share what you found there?

Michael Kitces: Yeah, yeah. We’ve published a couple of pieces over the years looking at the safe withdrawal rate framework over different time periods. And actually, the first person to publish on this was Benget himself. He did the original study in 1995.

And no great surprise, even then, people responded to him like, “Hey, neat study. But I’m a little younger, and I’m not planning for 30 years,” or some people said, “Hey, neat! But I’m already 73 years old. I’m not really planning for 30 years right now. Twenty would be awesome, thanks!”

So, he published a follow-up study. And we’ve since replicated the research and the results as well.

Basically, when you move the time period from 30 years out to 40 to 50 years, you end up going from a 4% rule to about 3.5% rule. So it’s a haircut, but it’s actually just a fairly small one.

And the reason, in large part, is markets on average go up way more than 4%. Even balanced portfolios, on average, go up way more than 4%. If we just plug in long-term market returns, you find that the safe withdrawal rates based on average returns should be about 6.5%. And actually, if you just calculate all of the historical withdrawal rates that would have worked on average, you find that’s about 6.5%.

So, in this world where, on average, 6.5% works, but we have to take out 4% just to defend against the bad luck that we could be on the eve of the next great economic catastrophe and we might happen to be like that 1929 retiree or that 1966 retiree or one of those horrible scenarios, the few that crop up, we take 6.5% all the way down to 4%. But we’re still only doing it because once every 30 years, we manage to do something that’s so horrible to our economy that we need 10 to 15 years to recover, and then the good returns finally show up. And once the good return show up, the bull market that eventually shows up is so good, it pretty easily carries you to the end.

Mad Fientist: Whether that’s 30 or 45 or 60…

Michael Kitces: Right! And that’s the thing. Once you make it through the first 10 to 15 years and you have what I call a decent chunk of money for the rest of the time thereafter, the difference between having money for another 15 or 20 years or another 30+ years (which on top of the first 15 is now 45+), it’s not actually that big of a difference.

And actually, because of that, I and a few others now have been starting to work on figuring out some kind of rules-based systems to make this a little bit more dynamic. The effect that really ends up happening, particularly if you’re looking at things like 40- or 50- or 60-year retirement time horizons, is if the first 10 years go well (or even just not horribly, you just get decent returns and things move up a little), and you’re only withdrawing something like 3.5% or 4%, your portfolio is going to climb 30%, 50% or 100% in the first 10 years.

And at that point, you’re going to sit down and say, “You know, I probably don’t need to still take this 3.5% withdrawal rate because, actually, my portfolio is up so much. What started out as 3.5% is now down to 2%. And 2% is way more conservative than we need to be even in bad sequences.

Mad Fientist: Sure!

Michael Kitces: And so, you end up with this path where, for the first 10 or 15 years, if things are good, frankly, you’re going to realize certainly 10 years and probably earlier that it’s okay to start ratcheting your spending a little bit higher because you’re already so far ahead of even that initial 3.5% rate that you might have started with.

But we start down at that lower number just in case it turns out we really are on the eve of the next horrible bear market or the next Great Depression and that things could be lousy for 10 or 15 years. And if that’s the case, you’ll be thankful that you were at a low number. You’ll spend very conservatively for the next 10 or 15 years. And then, eventually, by like the 2030s, eventually, when the good market returns show up in the 2030s, you’ll get to start lifting your spending up then at that point once the good returns finally set in and show up again.

And that really then becomes the dynamic. You won’t realistically stick with this one initial withdrawal rate and lifestyle for the next 50 or 60 years because 30 years in—in fact, frankly, probably 10 years in—you will either already be so far ahead that the number will seem trivial, and it will be clear that you need to re-anchor, or you’ll have gone through some difficult time period. But once the good returns show up, if the good returns show up (and they’re not just good, but they’re great), you’re still going to end up getting ahead at some point. a
That’s the nature of this threshold style approach of safe withdrawal rates. When everything anchors around literally the one worst case scenario of horrible below average market returns that we’ve ever, ever seen at any point in history, anything that’s better than that means that, at some point, you’re going to end up not getting a little ahead, a lot ahead, or really far ahead, and be able to adjust your spending.

And a lot of what we’re working on right now is just trying to figure out how far ahead do you realistically need to be in order to start dialing up your spending.

I don’t necessarily want to move it really far up the minute I get a good year in the market, so if there’s a market pullback, then I’m not going to have to sell that awesome, new thing that I just bought. So ideally, we want to ratchet this a little bit more slowly. But we’re trying to figure out what are the good trigger points for when are you far enough ahead that it’s okay to lift up your lifestyle a little bit because you’re far enough ahead that it’s safe.

Mad Fientist: And I think a lot of people who are thinking about early retirement, they want to be super conservative. A lot of people say like 3% or even less. Some people have said they’re trying to wait until they could only withdraw less than 3%. And I think they missed the point, the fact that if they have a really bad initial five years or ten years—
Early retirement is so different than standard retirement. When you’re planning for your standard retiree clients to retire, they’re probably not as marketable in the job market at that stage—maybe they’re not able to work as long hours or do a variety of different things potentially at an older age. Whereas somebody in their 30’s, they could get a job at the bar down the street if things got really bad, if you know what I mean.

Michael Kitces: And truly, the fact that when you retire young—
So, economically, the way I’d put it is when we work with older retirees who tap out when they’re 60 or 70-something, there’s not a lot of working options left for them. Either they literally don’t have any physical capability to work anymore, or they just don’t have good skill sets to get paid well. And so they don’t really have many working options left.
When you’re younger though, work is still an option. And work has an economic value attached to it. In fact, one of the ways that we like to look at it and talk about it with our younger clients is to literally say like, you know, when you’re in your 20’s and 30’s—and frankly, even still in your 40’s—your single greatest asset is your ability to work and generate income. We call it human capital.

So, you’ve got human capital which is your ability to work and generate some income, and you’ve got financial capital which is basically human capital that you had in the past that you converted into money and you saved. And now you’ve got financial capital.

So, our goal is to get to the point where our financial capital covers all of our needs, and we don’t need the human capital anymore. That’s what we call financial independence, “I don’t need to work to get paid anymore.” But it’s still your choice about whether or not to harvest your human capital and turn it into additional dollars—and you can.

You can continue to “work in retirement.” That’s actually why I’m a huge fan of even just the label of “financial independence” and not “retirement” because we see this routinely with clients—and have for years and years now.

If you’ve got any physical and mental capability to keep working in retirement, most people we see continue to work in retirement for a period of time, or they take a little bit of time off, and then they realize they’re kind of bored. They go back and they end up working in retirement.

Now, work looks completely different for them. Sometimes, it’s free work. It’s volunteer. It’s non-paid. It’s non-profit. Sometimes, it’s drastically lower paid than anything they were doing before. But hey, you don’t need the money, so who cares? Anything is better than nothing. It’s fun spending money.

And more importantly, particularly in the context where people are doing extreme early retirement scenarios, the fact that you can turn the human capital back on means you ultimately always have another fallback if things are going really badly for your financial capital, which is you just find a little bit of work to supplement it.

And the good news is you don’t even necessarily have to find a ton of work and supplement it a lot because when I’m only trying to spend a few percent of my financial capital in the first place, even a moderate amount of work that just brings in a little bit of money dramatically reduces what your ongoing spending need is if you are living fairly frugally in the first place.

And I find for a lot of prospective retirees or early financial independence folks, they actually grossly underestimate the sheer impact of just doing a little part-time work for like $10,000 a year. Bear in mind, if you were assuming that this 3.5% withdrawal rate was your number, an extra $10,000 a year of side gig income in retirement is like having another $300,000 in your portfolio.

Mad Fientist: Exactly!

Michael Kitces: If you were only going to assume a 2% rate, that $10,000 of side earnings—that’s a couple of hundred bucks a month—is like having another half a million dollars sitting as part of your retirement portfolio.

And so, when you view it that way, a little bit of side gig, side hustle, part-time, fun work, but you get paid, whatever you want to call it, actually has a dramatic impact on making that early retirement even more easily sustainable, including, for a lot of people, we point out like, “Hey, I know you’re trying to work another seven more years to hit your number for extreme early retirement, but you realize if you just cut your work back to 50%, you have enough today.”

Mad Fientist: Right!

Michael Kitces: Just cut back 50%. And if you cut back your income 50%, you don’t even have to keep doing your current job.

In fact, it’s funny. I see a lot of people that are really buried into a current job and feel like they’re stuck and they have to do it. But what I say to them is like, “if all you needed to earn was $10,000 or $20,000 a year”—for some people, it’s a higher number. But $20,000 or $30,000 a year is more than enough to supplement that early retirement goal”—you could do anything on the planet you wanted that would pay you $20,000 or $30,000. Could you come up with something that might be fun that you might even enjoy a little bit more than your current job?

Mad Fientist: Yeah.

Michael Kitces: And a whole lot of people say yes once you put it that way. They’re like, “I don’t even need to be done. If all I’ve got to do is earn $20,000 or $30,000, yeah, I can find some stuff to do that would be a lot more fun and a lot more enjoyable, that I might actually enjoy my day, and I wouldn’t even have to work as many hours. I could clear $10,000 or $20,000.

Mad Fientist: And it’ll be a much easier transition from work life to early retirement as well. Just taking the leap is probably pretty scary for a lot of people. So yeah, just dialing it back or switching careers into something that you actually enjoy is an excellent idea, definitely.

Michael Kitces: It makes a huge impact on how much you need or not need to be able to make that transition the first place.

Now, if you truly want to say like, “No, no. I’m so financially independent that I can take a zero on that work income for the rest of my life,” then okay, you’ve got to hit your whole FI number.

Mad Fientist: But even then, you’re maybe in your 30’s or your 40’s, and you’re more adventurous maybe than somebody in their 70’s. If crazy inflation hits the states, then you could just go to Asia for a year and have an amazing experience.

So yeah, you have a lot more flexibility as an early retiree on the earnings side, but you also have a lot more flexibility on the spending side. So if the really bad 10 years hits, there’s so many things that you could do rather than work an extra 10 years so that you can only withdraw 3%.

Michael Kitces: Yup! It’s so true. And again, I know even just from the flipside, having been through this with lots of clients over the years, the number of people who insisted on getting to their pure, standalone financial independence number because they never ever, ever, ever wanted to have to work again, within three years were working again.

Mad Fientist: Yeah, definitely. That’s something I’ve realized just within a year of leaving my job. It’s like I get the most happiness and pleasure from making progress on projects. It’s great doing these projects with no worry for whether it’s going to have a monetary reward, but most of these things do.

Michael Kitces: Yeah! Except they end up actually still having a monetary reward, right? I mean, even in the financial independence community, you look at folks like Mr. Money Mustache. He tapped out for his financial independence because he saved up to hit his number, except then he was bored in retirement and made a blog. The blog turned out to be so successful that now he’s making I think more money than he was when he was working off of the hobby that he was going to do when he didn’t have to work and earn any more money.

And I think, really, just the challenge for so many people is we get so stuck in this way of thinking that “I’m in a job now, and I don’t really enjoy my job. So the only path forward I can see is getting to a number where I can say goodbye to my boss and never have to work again” because working is, for some folks, unfortunately so unpleasant. It feels like the only relief is not working and getting to financial independence, when in reality, we need things to wake up to in the morning, and we need to be able to have a sense of progress. We want to crave to have something that gives us a feeling like we’re having an impact.

And most of those things end up being activities that earn some money—even if you didn’t mean to or even if it’s like, “Hey, I’m bored. And I really want to get some social fulfillment.”

We had a client like that. Two years later, he’s a really successful bartender. He was a programmer. He was a really social programmer who wanted to be on the computer world I think in part because he wanted more social interaction. He didn’t feel like he got it as a programmer. And he ended up being a bartender. He gets to chit-chat with people and have fun. He pretty much enjoys it because he only takes the shifts that he wants. And he only works a couple of days a week. And he’s making money—and it’s not trivial money.

You never would have thought like, “Hey, have you ever thought about quitting your good computer engineering job and being a bartender?” I mean, if we’ve had that conversation at the time, he probably would have laughed it off. That’s exactly where he ended out because he just—
Having 50 years in front of you is so much time. You’re going to want to find things to do. And a lot of the things you’re going to end up wanting to do are going to end up producing some dollars.

And again, the irony for him and so many is if he just admitted that even doing a little bartending work might have been on the table in the first place, he probably could’ve been out two years earlier.

Mad Fientist: Yeah, definitely. And it’s funny you mentioned Mr. Money Mustache. Just within the last 24 hours, somebody asked him and I a question on Twitter. And his response was the secret of very early retirement is that almost everyone makes money after retiring. Too much happy energy to avoid.

And I definitely agree. You just have so much more energy and so much more passion for things. And you can devote all that passion and energy towards something. And when that happens, it usually creates something good, and people somehow pay money for it or somehow money gets generated from it. So no, that’s great.
So, I’d like to just take a step back and have you put on your advisor hat. Is there anything in particular that you focus on when someone comes to you with maybe like really early retirement dreams?

Obviously, the savings aspect, and maybe talk a little bit about what you focus on. Is asset allocation different? I’m assuming for a longer time horizon, more stock-heavy portfolios are probably better.

But yeah, just talk to me as an advisor. What are some of the things that you consider when someone comes to you and says, “Hey, I want to retire really early.”

Michael Kitces: So, there’s a few things. One is just there’s a little bit of blocking and tackling around just the portfolio and the dollars and the savings, how it’s invested, what are you doing to actually produce cash flows from this.

Are you going to invest in a total return portfolio and simply spend some combination of interest dividends and capital gains? Are you are you buying real estate to generate cash flows? Is a bunch of the money tied up in pre-tax retirement accounts where we have both tax consequences—the truth is, if you’ve got a big account, but it’s an IRA, basically a quarter of that is earmarked for Uncle Sam. So, your financial independence’ nest egg is maybe not quite as big as you thought it was when you consider that Uncle Sam is going to lay claim to a portion of that.

And do we have a plan about how we’re going to get the dollars you need to spend given practical rules like IRA’s, have early withdrawal penalties before age 59 ½, which we can work around with what are called the substantial equal payment rules, but that limits how much money we can get out.

So, the first part of it is just kind of setting the cash flow plan and how the investments are going to be allocated to make sure that we can generate the cash flow dollars that we need.
The next thing –although, in truth, it’s really the first thing that I tend to talk about with folks—is just this whole early retirement/financial independence thing. What does it actually mean to you? And what’s your vision of how this is going to go for the next couple of years?

Just paint a picture for me. Where are you going to be living? Are you staying where you are or are you moving somewhere else? Are you going to travel? Are you going to sell your house and go nomad? Are you just going to hunker down where you are because you love where you live, you just hate it that you have to leave it to go to work every day? Paint picture for me of what this looks like.

That starts getting us into things like what is your cost of housing, what is your cost of living, what kind of cars are you going to have, or how many cars do you need, what’s your overall lifestyle expenses and spending.

For a lot of folks, that starts opening up the follow-up question we actually were just talking about earlier, which is: “So, there’s 168 hours in a week. You don’t have to spend any of them showing up for a job anymore. So what are you going to do to fill your time so you’re not just horrifically bored?”

Mad Fientist: Yes.

Michael Kitces: Everyone says, “I’m going to relax, be on vacation.” Like, “Okay, great! So you do that for three months. Then what? You’ve got 59.8 years left.”

Mad Fientist: Right, exactly.
Michael Kitces: After you take a couple of months off and take a breather, what are you thinking about doing with your time?

And sometimes, it gets in hobbies. Sometimes, it gets into volunteer work. But sometimes, that gets into side hustles, new jobs, new gigs, starting businesses.

Okay, if you’re going to start a business, how much of your money are you going to allocate starting your business, so that you don’t actually blow up your financial independence trying to start your new thing?

Just how are you going to fill all these time you’ve got for the rest of your life, particularly because most people tend to view what I find is a “I’m retired, and I’m not going to work anymore”? So, we try to kind of break that down a little bit into “Well, no, you don’t have to work anymore. But whether you’re really not going to work anymore, let’s talk about that because I’m slightly questioning it just having seen a lot of people go through this.”

The next big block in tackling issue usually is talking actually about health insurance and just making sure we’ve got a plan for how we’re handling health insurance.

So, this goes all over the map. The Affordable Care Act to me was an unbelievable blessing for early retirees because it gives you a path to guaranteed access to health insurance without being employed. And we had a lot of clients that pulled the trigger on early retirement basically as soon as the health insurance exchanges showed up because their only gap they couldn’t effectively solve was what to do with health insurance.

So, we can do health insurance exchanges now. The quality of the policies and even some of the pricing dynamics varies not trivially from one state to the next. So you’re just getting a handle on what are we doing for health insurance.

Sometimes, we see people split. One spouse is going to early retire, but the other one actually kind of likes his job, so he’s going to keep going. She’s going to retire, but he’s going to keep going—or maybe vice versa.

So, as long as one of them is working, they’re going to get health insurance through their employer. But if both of them is going to stop, are we buying it from an exchange? Are you going to start a business, and then buy your health insurance for yourself through your business (which you can do in some states, but not others)?
So, just figuring out what is the health insurance plan because, to me, that’s still one of the areas. You don’t mess around with your health insurance. That blows up not only early retirements, but entire family financial situations and individual financial situations. Medical expenses are still one of the leading causes of bankruptcy. Unexpected medical expenses are one of the leading causes of bankruptcy.

So, we’ll just usually spend some time just figuring out what’s the plan for health insurance and how are we making sure that’s covered.

And that’s really the primary focal points. I mean, there’s lots of little nuances for particular situations. But for most, the big three I find is just how are we going to generate cash flow from your retirement assets, what do you actually going to be doing with your time (you’re actually going to be earning some money because that will change some of the other decisions), and do we have a clear plan for health insurance.

If I can buckle those three down, there’s still a lot of other details that come after that, but most of the rest is not nearly as hard to sort out as making sure we’re good on those big three.

Mad Fientist: Great! And yeah, that seems pretty standard. It doesn’t seem like there’s any very unique challenges facing early retirees than someone retiring in their 50’s or 60’s.

Michael Kitces: Yeah. Again, figuring out the health insurance…

Mad Fientist: … is the big one.

Michael Kitces: It used to be a much bigger thing. My 57-year old retiree might have been able to get some employer continuation retiree medical plan to get us until age 65 to Medicare. Basically, for people in their 50’s and 60’s who retire, health insurance is a race to age 65 Medicare.

Mad Fientist: Gotcha!

Michael Kitces: When we’re retiring in our 30’s or even 40’s, we need another plan. Yes, at some point, in the 2040’s, I think Medicare will be available for you (unless we change it sometime the next 30 years), but we need a plan between now and then. That’s not going to include Medicare.

So, just figuring out what that is. Again, the health insurance exchanges made that much easier. Before that, it was lots of “Okay, can we find some kind of work that still attaches you to decent insurance? Can you start a business and buy insurance through it (which we could do in some states)? Do you need to move to a different state that has better insurance coverage that you can buy as an uninsured individual? Are we going to set a path where we go through COBRA Continuation Coverage from your former employer, and then exhaust that. You can get what’s called a guaranteed-issue HIPAA policy that they have to give you regardless of pre-existing conditions. But you can only get it if you expire your COBRA coverage first.

There’s all these maze of options that we’re sometimes messy, sometimes literally require people to move and relocate just to get to a state that had more accessible health insurance. And fortunately, a lot of that got easier with the health insurance exchanges—not perfect, but way, way easier than it was previously.

Mad Fientist: So, if somebody wanted to talk to somebody like you or another advisor, how would you recommend them go about it?

Obviously, the XY Planning Network sounds fantastic because it’s fee-only advisers, so you’re not forced about getting sold some crazy thing that’s just going to earn them a bunch of commission or things like that.

So, any sort of advice for somebody out there who is interested in just chatting to somebody about this?

Michael Kitces: Certainly, XY Planning Network is a great resource. I mean, we created it in part to help people through challenges like this. You can go There’s about 450 advisors on there.

Again, we’re simply a support network for them. It’s not like, literally, our advisor firm. We just tried to create a community of advisors that tackle and solve these kinds of problems.

And frankly, there’s a wide range there. Not all of them work with people that are doing early retirement/financial independence. But many of them do. And you can kind of search by their specialties, and who they work with, and even where they are (although a lot of people actually engage our XY Planning Network advisors virtually). The Internet’s an amazing thing. You can hire expertise where they are and video chat your way to good discussions.

And then, we do work with some folks in this context as well at our advisory firm. Our Pinnacle Advisory offering is designed to be a combination of investment management and financial planning. And we do both for folks.

So, we’re a better fit for those that have accumulated a nest egg, and they just want to go do their retirement thing and not have to worry about the money and how it’s being managed and how to generate the retirement cash flows because we have a system and process about how we do that. And then, we give them all the other financial planning advice and guidance that they need along the way—but different solutions for different folks.

Pinnacle is really built to do that combination of “We’ll watch your retirement dollars, so you can enjoy your retirement and give you all the other advice you need along the way.”

XY Planning Network advisors are more varied. They are a few of them that will help with the retirement nest egg. But a lot of them are like, “Hey, you want to manage your own portfolio assets, but you just want some ongoing advice about things to navigate,” great! We’re here for you. However you prefer to engage advisers, to each their own.

Mad Fientist: Cool! Okay, I will link to all of that good stuff in the shownotes. So, if anybody is interested, you can go there.

We’re already over an hour, which I’m so sad about because I think I got through like maybe 40% of all the stuff I wanted to gel with you about today. But this is been fantastic. I really appreciate you taking the time to chat with me.

I usually end all my interviews with just what one piece of advice you’d give to somebody who’s hoping to retire earlier or reach financial independence early in life.
Mad Fientist: Hmmm… so the biggest tip I’d give to people that are trying to reach financial independence early in life is watch out for that thing called lifestyle creep. The truth is when you look at even the research, most of us get our biggest raises through our 20’s and 30’s. That’s the biggest stage when our income grows.

And the trap that a lot of people get into is your income goes up, you feel like you can afford more stuff. You can go buy more stuff. Once you do that, you suddenly find that things that you never had in your life, you suddenly can’t live without. Once we add something to our lifestyle, it’s really, really unpleasant to subtract it even though we went for years and years without ever having it in the first place.

And because of that, once those expenses creep in, they’re so hard to subtract back out, and it ends up gobbling up a lot of the money that you could have ended up saving. And when we look at the people that are most successful in early retirement, every now and then, it’s just like, “Hey, I made a company, and I sold it for $10 million. Now, I don’t have to work anymore,” I’m like, “Cool, dude! Kudos to you,” but most people that go through successful early retirement, there’s a level of frugal living that tends to go with it.

But for most, I find that do it happily and successfully. It’s not because they took all the things that they enjoy and cut it out of their life, and suddenly, “Darn it! I’m going to live like a monk for 10 years if that’s what it takes for me to get to retire,” it’s that they just didn’t lift their lifestyle up as their income went up. They spend their 30’s living like they were still in their 20’s. And they live to spend their 40’s living like they’re still in their 30’s.

And if you do that, you’ll usually find you’re done by 50—sometimes, much, much earlier.

And so, particularly for those who are listening that are in their 20’s or maybe early 30’s where I find this tends to happen the most, just be careful about what new things you introduce in your life that quickly become a part of your lifestyle that are hard to go backwards on. Once you buy a new car, you almost never buy used again. Once you upgrade to a bigger house, you almost never downsize to a smaller one.

And so, if you spend time thinking about being cognizant of those permanent lifestyle additions that you make, even things down to like—boy, I’ll tell you. Once you hire someone to mow your lawn, you are never going to want to pull up that lawn mower again.

So, when you view it that way, it’s not—or whatever’s your area—it’s not $50 to get my lawn mowed this week. It’s if I do this, it’s $50 every other week every summer for the rest of my life, which is like $50,000—or whatever that adds up to—decision not to mow my lawn.

Mad Fientist: That’s a really good exercise, actually, yeah. Frame all of your spending as if you’re going to do it for the rest of your life. And then, add that up and see what that number is.

Michael Kitces: And particularly for the things that tend to be recurring. So when we hire housekeepers and landscapers and people to mow the lawn, and we buy new cars, and we buy new houses, those are the things that become lifestyle expenses that are hard to go back on.

And when you get good at those, what you find is—sort of the one-off stuff suddenly doesn’t get nearly so hard anymore.

I’ve spent most of my life living in houses that are, at worst, 20% of my income. Most of the time, I’ve lived in housing that’s less than 10% of my income. And when you spend less than 10% your income on housing, all that stuff about whether you should save money buying a $5 Starbucks coffee or not, I don’t give a crap. I just go buy the coffee. You know what? I feel like buying it, I just stop and buy it. I don’t care. When you get the big stuff right, and when you manage the recurring stuff, it’s actually amazing how not much the one-off stuff even adds up to at that point—unless you really go all out and splurge. If you’re going to buy $200 bottles of wine, you could probably add this up.

But there’s so much one-off stuff that just doesn’t matter when you make a good decisions about the big, recurring expenses that do.

And so, again, for the folks that are already there, unfortunately, you’ve got the challenging pain of figuring out some things that you may need to cut. But if you’re in your 20’s and early 30’s, you’ve still got a lot of raises likely ahead of you as you continue to grow your career and your income and your earning power. Just be cognizant about not introducing things into your life in the first place. Just be a little more restrained on that end, and you’ll be amazed at how quickly you actually reach that financial independence crossover.

Mad Fientist: That’s great advice. And I completely agree with what you said about just like the normal one-off’s. When I hit my FI number, and then I ended up working for an extra two years after the fact, one of those years, I was like, “Look, I’m getting this whole salary. I’m just going to go crazy because I didn’t expect to have this salary. I’m just going to, finally, for once in my life, just relax with money and just go nuts,” it felt like I went nuts.

We were going out to eat a lot. We were having drinks occasionally with friends. And it just felt like we were going crazy. But since all that big stuff was already taken care of from the years of me being really frugal, my wife and I didn’t increase our spending by more than a grand that year, and it felt like we were just going crazy!

Michael Kitces: Yeah. I mean, when you’re otherwise just kind of accustomed to a more moderate lifestyle, and you’ve gotten some of those big things right, again, it’s amazing how not much a lot of that little stuff adds up.

I find so many people inflict so much stress on themselves like, “I’ve got to save a couple of dollars a day by bagging my lunch instead of buying it in a Chipotle in the area.” You could just split an apartment with a friend for the next couple of years and save hundreds or a thousand dollars a month on rent and eat whatever the heck you want.

I spent the decade of my 20’s splitting an apartment with two buddies. It gave me enough savings to buy my house, pay for my marriage, and start my business just because I kept my housing dirt cheap. And you that I live in a standalone house, and I’m raising a family, there is no way I could go back to an apartment and split it with two buddies at this point.

But that’s the whole point. As long as I was doing that, it was fine. It was my lifestyle. I liked hanging out with them. It was all good. Once you move away from that to something else, it’s so hard to go backwards or to feel like going backwards. But if you just don’t introduce it in the first place, it’s amazing how quickly the saving start to accumulate.

Mad Fientist: Yeah, absolutely. Well, Michael, thank you so much. If people want to get in touch with you, obviously,—which I’m going to spell because it’s…

Michael Kitces: Yes, it’s K-I-T-C-E-S dot-com,

Mad Fientist: And that’s the best place to reach you?

Michael Kitces: Yeah, yeah. You can reach me through the site or Twitter, @MichaelKitces. It works as well.

Mad Fientist: Yes, you’re very prolific on Twitter, which is…

Michael Kitces: I love me some Twitter. But yeah, Twitter or just through is the best way to reach me.

Mad Fientist: Awesome! Michael, thank you so much. I really appreciate it again. And I look forward to seeing you in Dallas in October.

Michael Kitces: Absolutely! Good to see you at FinCon. I’m looking forward to it.

Mad Fientist: Awesome, man! Well, thanks again. Take care.

Michael Kitces: Absolutely! Thank you. You too.

Mad Fientist: Bye.

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Valuable Lessons from My First Year of Freedom Tue, 01 Aug 2017 15:51:31 +0000 It's been exactly one year since I left my full-time job and here are the most-important lessons I've learned during my first year of early retirement!

The post Valuable Lessons from My First Year of Freedom appeared first on Mad Fientist.

Finally, the post I’ve been waiting for.

After starting this site back in early 2012, I dreamt of the day I would write my freedom post.

I imagined it would be published the day after I left my job and would be the grand finale of my pursuit of financial independence.

Well, exactly one year ago today I left my full-time job and yet I’m only now writing about it.


There are a few reasons but the main one is that early retirement is a lot more complicated than it first appears.

As with everything Mad-Fientist related, I wanted to deeply explore the subject matter before writing about it.

So I decided to capture my thoughts and feelings over the entire first year and write about it after I had the chance to process everything.

It’s been a wild ride and I’ve learned a lot of lessons along the way so let’s dive in…

First Morning of Freedom

On Friday, July 29th of 2016, I finished my final day of work as a normal career man.

Bonus: To download a free copy of the spreadsheet I used on my own journey to financial independence, click here!

Since my last day was on a Friday, the weekend didn’t feel different than any other weekend.

It wasn’t until I woke up on Monday, August 1st that it really hit me.

And boy did it hit me.

You would have expected it to be the best morning ever but it was actually the only time in the entire first year that I freaked out about the whole thing.

I had escaped the normal life script but now I was in uncharted territory.

I was staring into the vast unknown and the immense gravity of the situation freaked me out (much more than I expected).

It’s crazy that I wasn’t mentally prepared for it, considering early retirement was something I had been thinking about and working towards for over five years.

The best way I can describe it is this…

Have you ever planned a really big trip? Maybe it was your honeymoon or a trip to a place very far away that you had to dedicate a lot of time to plan out.

Even though you spent months booking flights, researching hotels, and telling all your friends about your upcoming trip, the reality of what you were doing didn’t actually hit you until you got off the plane.

That’s what happened to us when we moved to China for three months.

We did a lot of research, talked about it all the time with our families, and thought about it daily but when we landed in Wenzhou and got off the plane, I freaked out and thought, “Holy shit, we live in China now…what are we doing?”.


Our Home in Wenzhou, China

This was sort of like that.

FI was something I talked about and thought about so much that it just became this abstract concept in my mind and didn’t relate to anything in real life.

It was a long-term goal that I guess I never actually pictured achieving.

In fact, after writing and talking about it so much, the entire idea of it became condensed into two meaningless letters – FI.

So the first morning of freedom was tough because I couldn’t process it all.

Try it out for yourself right now.

Close your eyes, imagine waking up on the first day after leaving your job, and think about the rest of your life.

You no longer have a normal script to follow and you hopefully have 60+ years of time to fill.

Pretty heavy, right?

First Day of Freedom

Although the first morning of freedom was pretty intense, luckily the rest of that first day got better.

To distract myself from the overwhelming task of figuring out the meaning of life, I just got back to work instead.

I had a lot of Mad Fientist tasks I wanted to complete so I threw myself into that.

It felt great. It felt normal.

I filled the void left behind by my job with other work that I wanted to accomplish.

I was happy to be making progress on things that were important to me and I started getting really excited about the idea of doing that every day.

Maybe life wouldn’t look so different, after all? I would still be working but I’d just be working on things I’m passionate about.

That was the whole reason I pursued early retirement in the first place so I’m not sure why I didn’t think about that when I woke up that day.

Lesson #1: Have a project in place that you’ve already started and are passionate about so it can fill the void in your life after you leave your job.

First Week of Freedom

After getting a lot of Mad Fientist stuff done on that first day, I continued getting even more accomplished the rest of that week.

Since I was working normal hours, that first week didn’t feel any different than the week before when I still had a job.

That made me realize how good of a career situation I had worked my way into. Since I worked from home and had a lot of autonomy, I had achieved 80% of the benefits of early retirement during my last two years of work and yet I still received a full paycheck.

Lesson #2: Use the power your money gives you to make your job as enjoyable as possible (see the Power of Quitting).

First Fortnight of Freedom

Ahh, fortnight…a word I hear often here in Scotland but one that is underutilized in America (it means “a period of 2 weeks”, by the way).

So although my first week of freedom was similar to working life, my second week gave me a glimpse of what my new life could be like.

New Experiences

I decided to start trying new things – things I had always said I wanted to try but just never got around to trying.

There was a climbing wall right next to where we used to live so Jill and I went and had some climbing lessons.

We loved it!

I thought to myself afterward, “Maybe I’ll become a rock climber or a mountaineer”.

That probably won’t happen but it could.

Anything is possible after financial independence and it was very exciting to think about all the possibilities FI provides.

Lesson #3: There’s an exciting world of things you can learn about and explore and FI gives you the energy, freedom, and time to do it.

Richer Experiences

During that second week, I also decided to dive deeper into things that I already enjoyed.

Coffee, for example, was something I liked drinking every day but didn’t really know anything about.

As my experience with beer and wine has shown me, the more you learn about something, the more you enjoy it so I signed up for a coffee tasting during that second week.

Jill and I went to the cafe that was hosting it and we tasted a bunch of different types of coffee. We learned a lot about growing the beans, how it’s made, how you should brew it, etc.

Now, my enjoyment of coffee has increased exponentially and I can appreciate the subtle flavors that I never knew existed before.

So rather than sucking down cup after cup of mediocre coffee every morning just to survive a normal workday, I now drink one or two cups of really good coffee and fully appreciate the experience.

Lesson #4: FI allows you to slow down and appreciate things on a different level (after reading this great post on Raptitude, I’m trying to expand that enjoyment to even more aspects of ordinary life).

First Month of Freedom

After my first fortnight of freedom, I started to see the possibilities of FI and it made me really excited.

To continue my exploration into new things, I decided to get a gym membership.


I had always said I would focus more on my health after I left my job and now there was no excuse. I had all the time in the world so fitting in a few hours at the gym every day was definitely possible.

Losing your excuses is exciting but it’s also scary because you finally have to do what you’ve said you were going to do.

Luckily, the gym near me was offering a special discounted one-month trial so I took full advantage.

I found a one-month weight lifting program online and I stuck to it for the entire month.

The first week wasn’t fun because I was weak, I got sore after every workout, and I didn’t know what I was doing in the gym.

The next week though was easier because I had more confidence and was starting to feel stronger.

By the end of that month, I felt great, I was actually enjoying the workout sessions, and I was happy with the changes I could see in my body.

Surprisingly, going to the gym also had a positive effect on my eating habits.

Once I started to see positive changes in my physique, I wanted to increase those changes even more so I started eating healthier.

It was crazy…in just one month I went from being an unhealthy, wimpy software developer to a healthy-eating, gym rat.

Lesson #5: FI = Rebirth. What you were before FI doesn’t matter. You can be anybody you want after FI so figure out the type of person you want to be and start being that person.

Less Stress

The gym helped my mental state but so did time away from work.

I didn’t realize it when I was working but I had a lot of low-level stress that was with me all the time.

My job was easy and wasn’t very stressful, so I didn’t think I was stressed, but I definitely noticed a big improvement by the end of the first month. I just felt more relaxed and less anxious.

I still had the occasional work nightmare (where I would be called into my boss’s office to talk about a certain Mad Fientist website that he just stumbled upon, haha) but I felt much calmer than before.

It also helped that I kept getting work emails for a few weeks after I left because it was nice to see all the work that needed to be done and all the problems that needed to be fixed, knowing I didn’t have to worry about any of it!

More Present

Another thing I realized during that first month was that I felt more present in my normal life.

Rather than thinking about the Mad Fientist stuff I wanted to get done while hanging out at my in-law’s house, for example, I would instead just enjoy my time there with everyone and not worry about anything else.

Since I had so much more free time, I knew all that things I wanted to do would get done eventually so it allowed me to enjoy the present more.

There’s less urgency when you feel like you have enough time for everything.

First Quarter of Freedom

While my first month of freedom gave me a taste of what normal post-FI life could be like, the next two months were anything but normal.

Instead, I used my newfound freedom to do something I had always wanted to do – travel around the world.


Kyoto, Japan

Jill and I spent three months traveling through 14 countries on 4 different continents and we went all the way around the globe!

During our trip, we visited Vermont and I got to drive my old commuting route on a weekday but instead of going into the office, we met the Frugalwoods for beer and barbecue instead.

Much better :)

Lunch with the Frugalwoods

My New Colleagues

First Year of Freedom

The trip was amazing but it wasn’t until we returned to Scotland that the reality of FI finally sank in completely.

Deep down, I think I expected to return to work after traveling because we had taken multi-month trips in the past and I always had to go back to work after them.

When I realized that I didn’t have to go back this time though, I can’t explain the excitement I felt.

The closest I can get to explaining it is this…

Have you ever woke up thinking it was Sunday morning but it was actually Saturday instead?

It was like that but 1,000 times better because it wasn’t just an extra day off that you didn’t expect but the rest of your life!

Instead of being sad about returning to a job that didn’t interest me, I immediately started making progress on new projects that I’ve been wanting to start for years.

I felt so lucky to be able to dedicate all my time to these things and I can’t remember a time when I felt more invigorated.

Worried Wife

In fact, it was around this time that I started to worry Jill.

I’m normally a solid sleeper and usually fall asleep shortly after laying down and stay asleep until morning.

When we returned from our trip though, I kept getting out of bed multiple times every night and I was also staying up way later than normal.

After a few weeks of this, Jill finally confronted me and asked what was going on. She was concerned that I was stressed about my new jobless life.

In actuality though, it was the complete opposite.

I was so excited about all the things I was working on during the day that I didn’t want to sleep at night!

When I still had a job and was commuting into the office, I hated going to bed because that meant that before I knew it, my alarm would be going off and I’d have to head to work again.

Now, I hated going to sleep even more but it was because it felt like such a waste of time when I could be doing all these other exciting things!

Full-Time Travel is Not for Us

The happiness I felt making progress on the projects I was working on made me realize that perma-travel is not for me.

I had previously assumed that I would be a full-time traveler whenever I finally reached financial independence.

Although eating new things and seeing interesting sights every day is a lot of fun, it’s not as fulfilling to me as being creative and productive.

When I’m on the road, it’s difficult to stay focused and get things done so I now know I need some normalcy in my life every once in a while.

Also, now there’s less need to escape normal life so travel isn’t as appealing as it once was.

Before when I was working, travel was a great change from the boring routine.

Now that post-FI life is so exciting and interesting, there’s no need to break up the monotony of normal life because normal life is so enjoyable.

Lesson #6: What you think you’ll do after FI may actually not be the thing that makes you happiest so don’t fully commit to a new lifestyle until you try it out first.

New Joys

To give you an example of how normal life can be so much better after FI, let’s take a look at food.

Before FI, lunch would be the most annoying and unsatisfying meal of the day because it would be eaten quickly and I would eat whatever was most convenient (when I was in the office, I would usually eat store-bought pita bread and hummus).

After FI, here’s what lunch looks like:

Food After FI

Do I feel like fresh-baked bread today? Sure, I’ll just bake some before lunch.

Poached eggs are so delicious so why not try to learn how to do cook those today?

Since lunch is now a meal to be enjoyed, might as well invest in some of the highest quality olive oil and balsamic vinegar I can find, right?


In addition to cooking more and eating healthier again, my gym activity has ramped up too.

My buddy Doug, who is a professional strength and conditioning coach, put me on a focused weightlifting routine for the last four months.

Since he doesn’t live near me, he just enters my workouts into a free mobile app called Trainerize. The app allows me to see what I need to do each day, watch videos to learn how to do the exercises, message Doug if I have questions, and keep track of my stats while I’m working out (which Doug reviews and uses to plan my next routine).

It’s been great and I like having a virtual coach because listening to podcasts in the gym is much better than having someone bark orders at me.

Bonus: If you want Doug to whip your ass into shape too, he has kindly offered a discounted price for Mad Fientist readers so take a look at the programs he offers here.

I’ve been going to the gym at least three days a week since I got back to Scotland and I feel better than I have in decades so it’s been fantastic!

Lesson #7: When you realize how good life can be after FI, you’ll want to make sure you have as many healthy years left as possible so you start to see fitness in an entirely new light.


I haven’t even mentioned finances yet but that’s because money hasn’t been an issue.

I was really worried about drawing money out of the accounts I spent so many years building up but I thankfully haven’t had to do that yet.

The reason is, all the websites and mobile apps I’ve built over the years have started bringing in more money than we spend (it seems the credit-card search tool I created is getting some traction in the travel-hacking community so it’s been generating a lot more income recently).

Travel Credit Cards

Screenshot from My Credit-Card Search Tool

Ironically, the income from this application only increased after I had already quit my job (i.e. when I didn’t need the extra money) but it has made the transition into joblessness much easier to deal with.

I had actually planned to write a lot of articles this past year about various withdrawal strategies but those will sadly have to wait until I actually start drawing down from my accounts.

Lesson #8: Start building a side business while you’re still working (but make sure you do it the right way) so that you have a meaningful project to work on after you leave your job and the potential to generate income without withdrawing from your portfolio.

Biggest Mindset Shift

This leads to the biggest mindset shift that occurred after reaching FI – the realization that money is no longer motivating.

This is quite a shocking and uncomfortable shift for me.

Money has motivated my entire adult life until this point.

I worked hard in high school so that I could get into a good college because I wanted to be able to get a job that paid a lot.

I worked hard at my job so that I could get promoted and earn more money.

I started side businesses in hopes of increasing my income.

I chose where to live, where to travel, and what to do, all based on how much I could earn or how much it would cost.

Now, I have enough money (plus some unexpected income coming in) so it’s not as important anymore.

This is a great position to be in but losing your main source of motivation is incredibly disorienting.

Some of the projects I planned to start after leaving my job were business ideas but now that earning more money isn’t as appealing, I don’t see the point.

If you stop and think about how many of your decisions and plans are motivated by money, I’m sure you’ll find that most of them are.

I’ve had to reevaluate my entire life and all my plans while simultaneously finding a new source of motivation.

Crazy, right?

I still haven’t fully come to grips with this but I’m slowly getting there.

For example, I recently removed all ads from this site. The ads have been annoying me for years because I thought they made my site look cluttered. I left them though because nobody was complaining about them and they were helping to cover the costs of running the site.

Once I realized the money they were generating was no longer necessary, I decided to remove them completely.

It should have been an easy thing to do, now that money is less important, but it was still really difficult. How could I just give up hundreds of free dollars every month?!

Luckily, I was able to power past my old mindset and realize the new reality so I removed the ads and I’m very happy I did.

That struggle showed me that although money is less important to me now, it’s still not meaningless so I still have some work to do.

It’s hard though because I’m trying to undo decades worth of programming and the new mindset seems so unnatural.

Completely Content

Since we have this unexpected extra money coming in, I asked Jill if she could think of anything we could buy or spend money on that would make our lives better.

We thought about it and realized that we love where we live so we wouldn’t want to move somewhere bigger or nicer because our current place is perfect.

Our cheap little car does everything we need it to so no need for an upgrade there.

Honda Jazz

Our $3,400 Honda Jazz – Best Car We’ve Ever Owned

We eat out enough and wouldn’t enjoy it if we ate out more.

We travel enough and actually plan to cut back on travel next year because less travel will make us both happier.

We racked our brains for a while and the only thing we could come up with was to buy a foam mattress topper and a couple of better pillows.

So we bought those two things for less than $100 and now we have everything we want or need.

Feeling like you can buy or do anything, while simultaneously being completely content with what you already have because you know more won’t make you happier, is one of the best benefits of pursuing FI.

New Motivation

Being content with what you have is great but you still need something to motivate you. Otherwise, what is there to get you out of bed in the morning (especially when that bed is much more comfortable, haha)?

I’m not exactly sure what my new main source of motivation is going to be but here’s what’s been motivating me the past year:

  1. Quality – I have an image in my head of what I know the Mad Fientist could be so I’m very motivated to make that happen. Producing something that I can be proud of and is as good as possible drives me to work hard.
  2. Helping People – I save all the emails and messages I get from people whose lives have benefited from Mad Fientist content because it motivates me to do even more.
  3. Creating – When money doesn’t matter, you can instead create things just because they are beautiful or bring people joy. Most of my time this year has been spent working on an artistic project (which I plan to write more about soon) and the act of creating something new from thin air motivates me to create even more things.


Well, there you have it…my freedom post, one year late.

It’s been an incredible adventure and better than I imagined so I can’t wait to see what year two brings.

How About You?

If you’re already free, what was your first year like? What motivates you these days, now that you don’t need more money?

If you’re not free yet, what do you think you’ll do once you pull the plug on work? What will get you out of bed in the morning?

Let me know in the comments below!

Related Post

The post Valuable Lessons from My First Year of Freedom appeared first on Mad Fientist.

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The Happy Philosopher – Semiretirement and Finding Happiness Mon, 17 Jul 2017 08:01:44 +0000 The Happy Philosopher joins me on the podcast to discuss semiretirement, job sharing, happiness, and the challenges doctors face during their pursuit of FI!

The post The Happy Philosopher – Semiretirement and Finding Happiness appeared first on Mad Fientist.

On today’s episode of the Financial Independence Podcast, Jeff from The Happy Philosopher joins me to discuss the unique challenges that doctors and other professionals face on the journey to early retirement.

When you invest so much time, money, and energy into your career, it’s no wonder that walking away from your job is much more difficult.

We discuss alternatives to early retirement, which provide a lot of the same benefits but limit the downsides, and we also dive into ways you can increase your happiness during your journey to FI!

Listen Now

  • Listen on iTunes
  • Stream audio file here
  • Download MP3 by right-clicking here


  • The unique problems that doctors face when pursuing financial independence
  • How you can separate your identity from your job
  • Why you should focus on happiness instead of FI
  • The benefits of the best drug in the world
  • Why you should stop watching news (and stop worrying about things you can’t control)
  • What is a ‘job share’ and why it’s a great alternative to early retirement

Show Links

Full Transcript

Mad Fientist: Hey! Welcome everybody to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in the personal finance space to find out how they achieved financial independence.

On today’s show, Jeff from the Happy Philosopher is joining me. I met Jeff back at the first Camp Mustache I attended. We had some great chats there and it was the first time I actually realized how unique the pursuit of FI is for doctors and lawyers and anyone else who’s invested a large amount of money and time into their careers. I didn’t really realize how much identity is tied up in those careers. And obviously, when you make such a huge investment like that, it’s hard to just step away after less than a decade of working.

So, I was excited to get Jeff on because he’s a practicing radiologist. And he’s come up with the unique solution to this. And it’s sort of like a semi-retirement which seems to be working really well for him.

So, I’m looking forward to diving into some of these unique challenges and some solutions to them. So without further delay, Jeff, thanks for being here.

Jeff: Brandon, thank you. I’m delighted to be here, man.

Mad Fientist: Yeah, I know! It’s been a while since we last chatted actually. We met back at Camp Mustache which I believe was in May of 2015, is that right?

Jeff: Was it 2015? I think it was 2016.

Mad Fientist: Wasn’t it? Was it last year?

Jeff: Yeah!

Mad Fientist: Oh, right! Geez, I don’t know how long I’ve been there anymore.

Jeff: When you retire, you get senile, and the years just kind of float by.

Mad Fientist: That’s right, man. I know I never know what time it is, what day it is. It’s great.

So yeah, we had a great weekend in the Pacific Northwest. We had some good chat over coffee one morning. I got to learn all about your story, so I knew I had to get you on eventually. I’m finally glad we made this happen. I appreciate you coming on.

Jeff: Yeah, absolutely.

Mad Fientist: So, before we dive into all the stuff I know I want to talk about, maybe just introduce yourself and tell a little bit about your back story and the Happy Philosopher.

Jeff: My story is pretty typical I think for—I’m a physician, a radiologist. I grew up in a typical middle-class world. Nothing particularly crazy about my childhood. I did well in school, got good grades. And it was just sort of assumed that I would go to college and get some sort of fancy job that required an advanced degree. And I was interested in science and medicine. It seemed like a pretty good fit for me. And I went for it.

I went to medical school which was an awesome experience. I just met a bunch of brilliant people while learning a skill that’s quite unique and quite awesome so.

So, I went through medical school. I had a little bit of a crisis in the latter part of med school. And I realized that I just didn’t know what kind of doc I wanted to become. Eventually, I settled on radiology. And my wife and I—who we got married in med school, met in college—went to go do our residency which is a training program after medical school. And then, at the tender age of 31, I was done with all my training and went into private practice.

And private practice was challenging. It was exciting. I was just living a typical life.

On paper, everything in my life was perfect. But after a few years of work, I just slowly got less and less satisfied with my job. I was noticing that I was becoming more anxious. I couldn’t really recharge on my weeks off. All of the exciting things about medicine, after a few years, just no longer were exciting for me anymore. So, all of the positive things, all the joy I got out of work, really went away. And all that was left was stress and anxiety and just sort of wanting to get out. I felt trapped.

And this was 35 or 36.

Mad Fientist: And how old are you now just to give the audience an idea of timescales?

Jeff: Forty-four.

Mad Fientist: Forty-four.

Jeff: Forty-four.

So, I came out around 2005 (I think I started my job). And so right around 2010-ish is sort of when I was going through this crisis.

And the economic situation around that time—so my entire investing career was sort of centered from 2000 to 2010. If you pull up a graph of the SNP500, for instance, between those years, it’s quite depressing. I wasn’t seeing any progress in my financial situation over that decade.

Mad Fientist: Did you have a lot of medical school loans to pay off? Or did you come out of med school pretty unscathed?

Jeff: By the end of residency, it was about $200,000 between the both of us. I know that sounds like a lot probably to a lot of your listeners. But really, that’s almost nothing for docs. And we could touch on this a little bit later in the interview, but some docs now are coming out with half a million dollars in student loans which is…

Mad Fientist: Crazy!

Jeff: Pretty crippling, yeah.

But we were always fairly frugal and good savers. And so when I came out of residency, when we started work at again around age 31, my net worth was still negative, but it was almost zero—which was a victory coming out of that.

Mad Fientist: Yeah.

Jeff: So anyway, here I am kind of going through burnout, and I really didn’t know what to do. And the only thing I knew that was certain was that I didn’t want to work forever. I didn’t want to work into my 60’s.

So, I went online and I typed and started researching early retirement. And of course, the stuff that comes up back then when you type in “early retirement” are the big brokerages, saying, “Hey, you can retire at 55” and that’s early retirement. I was like, “What?! I mean, that’s 20 years away. I can’t do that. That’s just not feasible.”

So, I typed in—I think I typed in “extremely early retirement.” You can imagine what popped up in my web browser, right? So, Early Retirement Extreme is the first hit.

I went on Jacob’s site. And I think the first article I read was how to retire in five years. And after I sort of picked up pieces of my brain that had flown all over the room and put them back in my head, I just started reading everything on the site. And after a few days, I was very impressed and thought it was awesome and also completely unfeasible for my life.

Mad Fientist: So, at this time, are you a pretty big spender? Obviously, you’re out of med school year radiologist, you’re making pretty big bucks, I would imagine, right off the bat as soon as you qualified, I would imagine. Is that correct?

Jeff: Yeah. The financial life of a physician is really interesting. It creates an interesting dynamic. So you go from poverty, which is medical school, where you’re going into debt (you’re borrowing all the money that you can and barely scraping by and still going into debt), and then you go into residency where you make a typical middle-class average salary.

I think now the average salary for residents is about $50,000 or $55,000 (which I think is about average in the United States for earning).

And then, you live that for a while. And then you go into practice and it’s multiples of that. So it’s sizable. It’s a lot of money.

And to be honest, I don’t know how much I spent those first five years. I don’t think it was crazy. I mean, we bought a nice house. We had to furnish the house. So there were some expenses there. But again, we were pretty naturally frugal, and just didn’t have the inclination to spend a lot of money. But we probably spent a lot more than we’re spending now. I still kept the car that I was driving in residency. I didn’t go out and go crazy or anything.

Mad Fientist: So, it wasn’t you’re spending then that you didn’t think that early retirement in five years wasn’t possible. And it wasn’t your income obviously because you’re making more than enough to make that a reality.

So, was it just the psychological aspect of pulling away from work after just such a short career or is that the sunk costs of you’ve put so much money and time into this career to then walk away? I imagine there’s so many different challenges for doctors (which is why I was really excited to get you on) that maybe some normal careers don’t have.

So, can you talk a little bit about why your initial reaction to Early Retirement Extreme was like, “I couldn’t do that in five years?”

Jeff: Yeah. I mean those are great points that you make. And I definitely want to dig into those.

For me, it was that Early Retirement Extreme was so extreme, and I couldn’t really visualize taking those actionable steps and principles and applying them to my life. For me, I was earning plenty of money, and I was not spending a lot. For me, it was lack of knowledge. I didn’t really know that I could retire in five years because I didn’t know how much I needed.

I remember one conversation I had with a spouse of a physician that I know. He said, “Yeah, you probably need like $10 million to retire.” I was like, “Holy!” I’m doing the math in my head. “$10 million? That’s a lot of money. I’m going to have to work awhile for that.”

But I just sort of accepted that. I didn’t realize, I didn’t know really about the 4% rule and all the things that most people seeking FI know about.

And so, I was reading Early Retirement Extreme, and I read a guest post by this guy. You may have heard of him, Mr. Money Mustache. I’m reading this, and I’m like, “Mr. Money Mustache? Who are these people? What’s going on here?” But that’s sort of the post that got me over to Pete’s site.

And this was back in 2011 or 2010 or whenever it was. He had just started.

Mad Fientist: Yeah, it was probably the same guest post that I found out about him from I think as well.

Jeff: Yeah, yeah. So, there wasn’t a lot on his site, but he was very prolific back then, and he was posting new material like every few days. So every few days, I would read these earth-shattering things and ideas from him.

And it didn’t take me long to realize that the math part was really easy for a physician as long as you can get your spending under control. It’s not an earning problem. The math part was really easy. But you’re right, the psychological part is a lot bigger deal for physicians in particular and I think a lot of other high income or sunk cost professions like you mentioned.

So, becoming a physician is a different job than any other that I’ve had. My identity sort of merged with being a doctor.

For instance, when I was a busboy or waited tables or even did some door-to-door sales for a while, as soon as I stopped doing that for the day, I no longer identified with it. I went back to being Jeff. But becoming a physicians a little bit different—and I imagine a lot of other professions—where you never really detach from that identity when you go home from work.

So, the idea of giving that up early in life is like giving up a part of your identity. And ego has a really tough time with this.

It’s interesting. Physicians, if you look at the statistics, they retire later than the average population (a few years later than people on average). And that’s kind of ridiculous when you think about how much money they make. But I think a lot of it has to do with just they can’t detach. It’s psychologically painful.

And if you look also look at statistics like job satisfaction, there’s a lot of really dissatisfied docs out there. I’d like to believe that it’s a psychological problem, not a money problem or a job satisfaction thing. I don’t know that for certain. But that’s my guess. Talking to a lot of docs, I think that’s true. I think that’s true. It’s hard to untangle from that. That is probably the biggest challenge because the math is easy for a doc to retire early.

Mad Fientist: And there are other things to consider. It’s pretty much impossible to go back after stepping away. That’s something I’ve heard you say in person and write about. So can you maybe talk about that and how that’s definitely different for a lot of professions? I have no doubt that I could go back to software development in a few years and say that I was just working on my own stuff in the meantime. Maybe I would spend a few months catching up on the latest technologies, but I could go back. But that’s not really the case with your profession.

Jeff: Yeah, and I think that colors a lot of my views with respect to retirement, how much money I need. You’re absolutely right. It’s not impossible to go back into medicine after a long hiatus. But for all practical purposes, it’s very, very difficult. You have to use these skills to sort of stay on top of things. The technology is constantly changing. And to be honest, you have to keep all the licensing and all the continuing education.

And who’s going to want to hire a physician that’s been out of practice for 10 or 15 years when you can just hire somebody fresh out of training who is eager.

There are just a lot of questions. And I think that it would be very hard to get back into the field after being out for so long.

That, and it’s just so darn hard. I mean it’s really intellectually demanding. I think it’s hard to keep that edge after being out for a prolonged period of time. I know there are some people out there that have done it, but it’s hard. I think it’s easier to go back in if you love it, if you’ve always loved it, and then you go out for some reason and you go back in. It’s easy. But if you burn out, then you’re out 10 years, the thought of going back is—psychologically, I don’t think that I would be able to do that.

So, I feel like this is my chance. I’m reimbursed very high amounts of money for my time. And this is my chance to make that trade, the most advantageous rate that I can. And then, when I’m ready to step away. I don’t want to have to worry about that.

I think talking to a lot of physicians, sort of people that I’ve interacted with who’ve come at me through my blog, a lot of them feel the same way. They just have this underlying unease about leaving medicine too early and fear of having to scramble later in life. And I think it’s justified.

I mean, a lot of people in the early retirement community, the FI community don’t have those thoughts because it’s so easy for them to just slip back into work.

Mad Fientist: Okay. So you stumbled upon Early Retirement Extreme. You realized you weren’t happy. You wanted to make a change. So how did you get to the point where you actually were comfortable with the idea of walking away at some point much earlier than you probably anticipated before?

Jeff: So, that was actually kind of a compressed crisis in my life. I was going through all of the reading, learning. And it didn’t really do anything to improve my situation at work. Just after a particularly bad stretch of work and call, I came home one day, I had rough math in my mind, and kind of knew what I could do, and I just told my wife like, “I can’t do this long-term. I’m committing to five more years, and then I’m walking away. I think we’ll have enough money. But that’s all I can mentally and emotionally commit to right now.”

Mad Fientist: How did she take it?

Jeff: Surprisingly well! I’ve made a lot of mistakes in my life, but the big decisions have been really good. My decision of who to choose as a spouse was perhaps one of my best decisions. She was very supportive. She kind of understood what I was going through. And I think we both really want each other to be happy. And this was my path to happiness. It really is what I thought.

Mad Fientist: Now, she’s a doctor too. But she did step away to become a full-time mom, is that right?

Jeff: That’s right.

Mad Fientist: So, had she done that at this point or is she still working as a full-time doctor?

Jeff: Yeah, she was a stay-at-home mom at this point. That was the irony of this. She probably would have been the better one to keep working. But I would have made a really bad stay-at-home dad. She’s way better being a stay-at-home mom than I would be a stay-at-home dad.

But yeah, she was out of medicine for a few years at that point. And I mean that’s a whole other podcast, that transition…

Mad Fientist: Yeah! How was that transition in a nutshell? Did she handle that okay or was she going through the same things that you were going through thinking about stepping away?

Jeff: She was going through a lot of the same things that I was going through. But she struggled with walking away, potentially not going back to it. But she really wanted to be a stay-at-home mom too.

And when we were both working, we just could not find the balance in our lives. Our lives were not fun—trying to arrange the childcare, trying to arrange just living life around two call schedules and the kids.

So ultimately, that was a really good decision for all of us. And I don’t think that she’s regretted it.

Mad Fientist: So, you tell her that you’ve got five years max left. What happened after that?

Jeff: I realized that although I shortened my prison sentence, so to speak, I didn’t really make my cell any more comfortable. I still had five years to go, and I was still burned out, and I still wasn’t happy. So I had to figure something else out.

I had to start focusing on being happy now with whatever situation I was in rather than saying, “Okay, I’m just going to go through this and wait five years, and then I’ll be happy.”

So, to me, just that decision is really what pushed me in a different direction, focusing more on being happy, rather than delaying it, rather than just being miserable now, and then at some point in the future, sort of guessing that I’ll be happy because I’m financially dependent.

Mad Fientist: So, what steps did you take to work on that during the five years?

Jeff: Mainly, I did a lot of self-reflection, self-experimentation, reading. I went down the Mr. Money Mustache philosophy of life. You read his blog. He’s got a great philosophy on doing things for joy, having gratitude, using stoicism and negative visualization, meditation, all these sort of tools.

I started doing a lot of meditation, experimenting with that, experimenting with diet, and just doing all kinds of things in my life to try to make myself the best version of me regardless of what my situation was.

Mad Fientist: And did it work?

Jeff: It did actually. I mean, it was amazing. It was a complete transformation. And a big part of it was just eliminating things from my life that were negatives. I know you’ve written about this, Brandon—maybe one of my favorite articles that you wrote was happiness through subtraction.

Mad Fientist: Yeah, yeah, it was.

Jeff: Yeah, absolutely brilliant article.

And so, I started just getting rid of unnecessary things in my life, both physical and mental obligations. I got rid of news and most of television. And it’s just amazing.

Mad Fientist: I know that one will make you happy. That one’s so huge!

Jeff: People don’t believe me when I tell them this, “Just get rid of news.” They look at me like I told them to chop off their arm. I’m like, “No, just try it 30 days. Nothing will change in your life except for the better.” There’s no actionable information. It’s just designed to flick your adrenal glands and get cortisol into your blood and make you anxious.

Mad Fientist: Right, exactly! It’s all outside your control, so don’t even stress out about it.

So, that was a big effective one for you. Was the meditation good? That’s not something I’ve ever tried.

Jeff: Meditation is amazing. I wrote a big post on it on my experiences with it.

Mad Fientist: What’s the name of the post? I’ll link to it on the show notes.

Jeff: I think it’s something really stupid, like 1 Simple Trick to Increase Your Awesomeness.

Mad Fientist: Okay, cool. I’ll link to it.

Jeff: It was, by far, my most ridiculous title ever on the blog. But I’ll send that to you.

But the great thing about meditation is you don’t have to be good at it. You don’t have to do it consistently. It has lasting effects. I mean, it’s amazing! If it were a drug, it would be illegal because it’s so good. There’s little to no downside. It’s such a small time commitment.

And it improves sort of the day-to-day mindfulness without you even really realizing it. I’m terrible at it. I’m not a great meditator at all.

Mad Fientist: So, what does it look like for you because I know there are lots of different types?

Jeff: I do more of a mindfulness meditation. I break it down into two categories—the mindfulness or just sort of paying moment-to-moment attention, and then the more concentrative, focused concentration. I don’t do that. I just do the mindfulness where I sit quietly. And I usually do guided meditation for 10 minutes, kind of just pay attention my breath. And then, every time I get distracted by a thought, I just observe it, and then gently go back to the breath.

It’s just this repetitive practice of not getting caught up in your thoughts and just letting them sort of float around like clouds and not get too attached to them.

Mad Fientist: Yeah. I’ve heard lots of really intelligent, successful, smart, happy people talk about it. When enough people say something, then you should probably take notice and try it out for yourself.

Jeff: Yeah, I got into it, really, I was listening to Tim Ferris and his podcast (which is pretty great). And he made this observation that all of these high achievers that he interviewed, a ridiculously high percentage (something like 70% of them) had some sort of meditative or mindfulness practice. So he realized there was something to it. And that was my gateway into it.

Mad Fientist: Right! So, you’re doing all these things, and you’re becoming happier. Are you happier work or is it just you’re happier in general so you can deal with not enjoying work as much, you can deal with that better?

Jeff: Yeah, I think I did become happier at work in spite of nothing changing. I mean I still had the same job. It was still just as stressful. But the simple act of not worrying about things that I couldn’t control—There are so many things that are out of our control. And once I stopped worrying about those, I noticed a big improvement. I could just deal with the day-to-day stresses of the job a lot better.

It still wasn’t optimal. I still didn’t want to do it full-time, and I was still looking for ways to either shorten it or change it, but at least I was in a place where I wasn’t spiraling down. I wasn’t getting worse. I was getting better.

Mad Fientist: That’s great! So, can you talk a little bit about where you’re at now and how you got there?

Jeff: Yeah, absolutely. So, what you’re referring to is I now work half time. I work part-time. And this was a job share that I engineered. And it was about three years after my initial episode of burnout.

So, I actually worked full-time two to three years after that initial five year declaration of independence. And at that point, I finally engineered this job share and convinced my group that that would be a positive addition. So, me and my job share partner are…

Mad Fientist: One full-time employee?

Jeff: Yeah. So, when we’re plugged into the schedule, one of us is working on that day. And we just decide which days we’re going to work and which days the other person is going to work. So it’s great. There’s a lot of flexibility.

We are dependent on one another. So, we have to coordinate which days are working. And we have to both sort of be on the same page there. But it’s fantastic! It’s definitely saved my career. If I had been full-time and not been able to do this, I’m convinced I’d probably not be working right now.

Mad Fientist: Right! So yeah, because the five years is pretty much up, and you’re still going. So, what’s your plan from here on out?

Jeff: That’s a great question. It’s something that I’m still trying to figure out. As I get closer to achieving this bulletproof FI number—and as you know, there’s a lot of deliberation and debate about when do you actually become financially independent. I like how some of the people—like JD Roth I think has written about this, The Degrees of Financial Freedom and Independence.

Mad Fientist: Yeah, that’s a fantastic post, and I will link to that in the shownotes. That’s one everyone should read I think.

Jeff: Absolutely! One of his best, I like it a lot.

But as I get to this place where work is becoming more and more optional, I don’t know. I don’t know what I’m going to do. A few more years… tomorrow…? I don’t know.

Mad Fientist: It’s really that up in the air.

Jeff: I’ve matured my thinking to a point now where I’m working for money and I’m going to do that as long as I’m satisfied and doing good work in my job. And at some point that that exchange will not make sense—you know, the marginal utility of additional work is not going to make sense just because I don’t need any more money—

Mad Fientist: Yeah, you have a great post on that, which I’ll link to as well, where you talk about how money gets less valuable as you get older and time gets a lot more valuable as you get older because you have less time left. So each second is more valuable. So I will link to that because that’s really good as well.

Jeff: And stacked upon that, each additional dollar spending you stack on the top of your topline spending, you’re going to get less marginal return on the happiness. You have three things working against you as you keep working later into your life.

Mad Fientist: So, I end all my interviews with asking, “What’s one piece of advice you would give to somebody on the path to financial independence?” But I’m going to ask if you could maybe give two pieces of a advice—one for someone in a job similar to yourself that has unique struggles that we touched upon on this interview, but then also, you can give one general piece of advice to everyone else out there.

Jeff: Yeah. So I guess my one piece of advice to a physician or somebody in my situation is to think about separating your identity as a physician from who you are as a person. Do your best to keep boundaries between those two things. You can really become unhappy fast in medicine and dissatisfied. And if your identity is that of a physician, and it’s so intertwined, when you fail at medicine, or you fail to be happy, you become the failure. And it can be really emotionally destructive.

Physicians have a pretty high rate of depression and suicide compared to the average population. So it’s just important to be aware of these things and to get help if you need it.

Mad Fientist: So, separating your identity from your job, that seems like it’s easier said than done. Is there any sort of specifics that you could give to help someone do that? I’m not exactly sure where I would start with that if I was working all the time and just totally consumed by the job.

Jeff: Trying to create boundaries like when you come home, try to create some sort of ritual maybe to leave your work at work and focus on things at home that are important to you. Learn to say no to obligations that suck all your energy—because medicine will. It will take everything from you—and more—if you let it. It’s never satisfied. There’s always more to be done.

But I think just knowing yourself and deeply reflecting on these things and being aware of them is a step in the right direction.

Mad Fientist: Excellent! So now, your general piece of advice to anyone out there that’s pursuing financial dependence?

Jeff: Yeah, I think my one piece of advice is to not focus on financial independence, but instead to focus on happiness. When I started down this path, I used to think that freedom, or more specifically, financial independence, leads to happiness. And I think it can. But I think it’s reversed. I think happiness leads to freedom.

And the reason I know this is because I know a lot of people that are financially independent that are 100% miserable. They’re lonely, they’re anxious, they’re fearful… but they’re free. Financial independence is not the end goal; happiness is the end goal. So we need to always keep that in mind. We just need to internalize that message. Happiness leads to freedom.

And to be honest, it’s not that expensive to become happy. When you can cultivate happiness in your life with really simple things that I write about like gratitude, getting rid of negatives from your life, decluttering all the physical things you don’t need, the mental baggage and the obligation—like I said, stop watching the news, just walk and meditate—those things don’t cost anything, but they’ll make you happy.

Happiness is freedom. You have to practice. It’s a skill. Happiness is definitely a skill. It’s not something that we just blunder into for the most part.

Mad Fientist: I completely agree. And that’s a fantastic advice and a great way to end the interview.

So Jeff, I really appreciate you taking the time to talk with me today. And if anybody’s interested, head over to You can get in touch with him there.

So Jeff, I appreciate it, man!

Jeff: Yeah. Hey, keep doing great work, man.

Mad Fientist: Thanks very much. Aright! I’ll talk to you soon.

Jeff: Alrightee!

Mad Fientist: Bye.

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